Question

Inventory in the beginning of the year is ₹ 1,20,000 and at the end is ₹ 2,00,000. Inventory Turnover Ratio is 8 Times. The Revenue from Operations is 25% above cost. The Gross Profit will be ______.

पर्याय

• ₹ 2,40,000

• ₹ 3,20,000

• ₹ 4,00,000

• ₹ 3,60,000

Answer 1

Inventory in the beginning of the year is ₹ 1,20,000 and at the end is ₹ 2,00,000. Inventory Turnover Ratio is 8 Times. The Revenue from Operations is 25% above cost. The Gross Profit will be ₹ 3,20,000.

Explanation:

Given:

Opening Inventory = ₹ 1,20,000

Closing Inventory = ₹ 2,00,000

Inventory Turnover Ratio = 8 Times

Gross Profit = 25% on Cost

$$\begin{aligned} \text{Average Inventory} &= \frac{\text{Opening Inventory} + \text{Closing Inventory}}{2} \\ &= \frac{1,20,000 + 2,00,000}{2} \\ &= {₹\ 1,60,000} \end{aligned}$$

We know that:
$$\text{Inventory Turnover Ratio} = \frac{\text{Cost of Revenue from Operations}}{\text{Average Inventory}}$$

Therefore:

$$\begin{aligned} \text{Cost of Revenue from Operations} &= \text{Inventory Turnover Ratio} \times \text{Average Inventory} \\ &= 8 \times 1,60,000 \\ &= {₹\ 12,80,000} \end{aligned}$$ 

Now, the Gross Profit amount is:

$$\begin{aligned} \text{Gross Profit} &= 25\% \text{ of Cost of Revenue from Operations} \\ &= 12,80,000 \times \frac{25}{100} \\ &= {₹\ 3,20,000} \end{aligned}$$