Question

Calculate Opening Inventory from the following information:

Inventory turnover ratio: 5 times

Revenue from Operations: ₹ 1,00,000

Gross Profit: 25% of Cost of revenue from operations

Opening inventory is ₹ 5,000 less than Closing inventory

पर्याय

• ₹ 19,500

• ₹ 17,500

• ₹ 13,500

• ₹ 12,500

Answer 1

₹ 13,500

Explanation:

Let the Cost of Revenue from Operations be x.

Revenue from Operations = Cost of Revenue from Operations + Gross Profit

1,00,000 = `x + 25/100 xx x`

1,00,000 = `125/100 x`

`125/100 x` = 1,00,000

`x` = `(1,00,000 xx 100)/125`

Cost of Revenue from Operations `(x)` = ₹ 80,000

Inventory Turnover Ratio = `"Cost of Revenue from Operations"/"Average Inventory"`

5 = `(80,000)/"Average Inventory"`

Average Inventory = `(80,000)/5`

= ₹ 16,000

Let the Closing Inventory be x.

Opening Inventory = `x − 5,000`

Average Inventory = `("Opening Inventory" + "Closing Inventory")/2`

16,000 = `(x − 5,000 + x)/2`

16,000 = `(2x − 5,000)/2`

16,000 × 2 = `2x − 5,000`

32,000 = `2x − 5,000`

`2x` = 32,000 + 5,000

`2x` = 37,000

`x` = `(37,000)/2`

Closing Inventory `(x)` = ₹ 18,500

Opening Inventory = Closing Inventory − 5,000

= 18,500 − 5,000

= ₹ 13,500