Question

Calculate Gross Profit Ratio from the following data:
Cash Sales are 20% of Total Sales; Credit Sales are ₹5,00,000; Purchases are ₹4,00,000; Excess of Closing Inventory over Opening Inventory ₹25,000.

Answer 1

Credit Sales = 5,00,000
Cash sales = 20% of Total Sales
 
Let Total Sales be ‘x’
Therefore, Cash Sales = 20% of x
Total Sales = Cash Sales + Credit Sales

`x = 20/100x + 500000 `

`x - 20/100x = 500000`

`80/100x = 500000`

`x = (500000 xx 100)/80 = 625000`

Cost of Goods Sold = Purchases – Excess of Closing Stock over Opening Stock
= Rs 4,00,000 – Rs 25,000 = Rs 3,75,000
Gross Profit = Total Sales – Cost of Goods Sold
= Rs 6,25,000 – 3,75,000 = Rs 2,50,000

Gross Profit Ratio = `"Gross Profit"/"Net Sales"xx 100 = 250000/625000 xx 100 = 40%`