Question

A company earns a gross profit of 25% on cost. Its credit Revenue from Operations are twice its cash Revenue from Operations. If the credit Revenue from Operations are ₹ 8,00,000, calculate the gross profit ratio of the company.

Answer 1

Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operations

= `1/2` (₹ 8,00,000) + ₹ 8,00,000

= ₹ 4,00,000 + ₹ 8,00,000

= ₹ 12,00,000

Let the Cost of Revenue from Operations be x.

Gross profit = Revenue from Operations − Cost of Revenue from Operations

25% of x = ₹ 12,00,000 − x

x + `25/100` x = ₹ 12,00,000

`125/100`x = ₹ 12,00,000

x = `(₹ 12,00,000 xx 100)/125`

x (Cost of Revenue from Operations) = ₹ 9,60,000

Gross profit of 25% on cost,

Gross profit = `25/100 xx ₹ 9,60,000`

= ₹ 2,40,000

Gross Profit Ratio = `"Gross Profit"/"Revenue from Operations" xx 100`

= `(₹ 2,40,000)/(₹ 12,00,000) xx 100`

= 20%