Question

Compute Gross Profit Ratio from the following information:
Revenue from Operations, i.e., Net Sales = ₹4,00,000; Gross Profit 25% on Cost.

Answer 1

Gross Profit = 25% on Cost 

Let Cost = x

∴ Gross Profit = `x xx 25/100 = (25x)/100`

Sales = Cost + Gross Profit

`400000 = x + (25x)/100`

or,`400000 = (125x)/100`

or, `x = (400000 xx 100)/125 = 320000`

Cost = x = Rs 3,20,000 

Gross Profit = Sales - Cost

= 400000 - 320000 = 80000

Gross Profit Ratio = `"Gross Profit"/"Net Sales" xx 100`

`=80000/400000 xx 100` = 20%