Question

Calculate the Gross Profit of Saturn Ltd. from the particulars given below:

Particulars
Average Inventory	8,000
Inventory Turnover Ratio	6 times
Selling Price	25% above cost

Answer 1

Inventory turnover ratio = `"Cost of revenue from operation"/"Average inventory"`

`6 = "Cost of revenue from operation"/8000`

Cost of Revenue From Operation = 48,000

Selling Price = 48,000 + 25% of 48,000

= 48,000 + 12,000

= 60,000

Gross Profit

= 60,000 – 48,000 

= ₹ 12,000