Question

Following information is available for Maxwin Ltd. Calculate Gross Profit Ratio:

Particulars	₹
Cash Revenue from Operations	5,00,000
Credit Revenue from Operations	13,00,000
Purchases	8,00,000
Return Outward	10,000
Carriage Inward	40,000
Carriage Outward	30,000
Closing Inventory	90,000
Average Inventory	1,20,000
Employee Benefit Expenses (including Wages ₹ 1,00,000)	1,70,000
Rent	90,000

Answer 1

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

= ₹ 5,00,000 + ₹ 13,00,000

= ₹ 18,00,000

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

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

₹ 1,20,000 = `("Opening Inventory"  + ₹ 90,000)/2`

₹ 1,20,000 × 2 = Opening Inventory + ₹ 90,000

₹ 2,40,000 = Opening Inventory + ₹ 90,000

Opening Inventory = ₹ 2,40,000 − ₹ 90,000

= ₹ 1,50,000

Cost of Revenue from Operations = Purchases + Carriage Inward − Closing Inventory − Return Outward + Opening Inventory + Wages

= ₹ 8,00,000 + ₹ 40,000 − ₹ 90,000 − ₹ 10,000 + ₹ 1,50,000 + ₹ 1,00,000

= ₹ 9,90 000

Gross Profit = ₹ 18,00,000 − ₹ 9,90,000

= ₹ 8,10,000

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

= `(₹ 8,10,000)/(₹ 18,00,000) xx 100`

= 45%