Question

From the following information, calculate Gross Profit Ratio:

	₹
Revenue from Operations:
Cash	2,00,000
Credit	8,00,000
Purchases:
Cash	40,000
Credit	3,60,000
Carriage Inwards	8,000
Salaries	42,000
Decrease in Inventory	1,22,000
Returns Outwards	20,000
Wages	20,000

Hint: Revenue from Operations means Net Sales.

Answer 1

Calculation of Net Revenue from Operations (Net Sales):

\[\text{Net Revenue from Operations} = \text{Cash Sales} + \text{Credit Sales}\]

$$\text{Net Revenue from Operations} = ₹ 2,00,000 + ₹ 8,00,000$$

$${\text{Net Revenue from Operations} = ₹ 10,00,000}$$

Calculation of Cost of Revenue from Operations:

1. Total Purchases:

$$\text{Total Purchases} = \text{Cash Purchases} + \text{Credit Purchases}$$

$$\text{Total Purchases} = ₹ 40,000 + ₹ 3,60,000 = ₹ 4,00,000$$

2. Net Purchases:

$$\text{Net Purchases} = \text{Total Purchases} - \text{Returns Outwards}$$

$$\text{Net Purchases} = ₹ 4,00,000 - ₹ 20,000 = ₹ 3,80,000$$

3. Cost of Goods Sold (COGS):

$$\text{COGS} = \text{Net Purchases} + \text{Carriage Inwards} + \text{Wages} + \text{Decrease in Inventory}$$ 
$$\text{COGS} = ₹ 3,80,000 + ₹ 8,000 + ₹ 20,000 + ₹ 1,22,000$$

$${\text{COGS} = ₹ 5,30,000}$$

Calculation of Gross Profit:

$$\text{Gross Profit} = \text{Net Revenue from Operations} - \text{COGS}$$

$$\text{Gross Profit} = ₹ 10,00,000 - ₹ 5,30,000$$

$${\text{Gross Profit} = ₹ 4,70,000}$$

Calculation of Gross Profit Ratio:

$$\text{Gross Profit Ratio} = \left( \frac{\text{Gross Profit}}{\text{Net Revenue from Operations}} \right) \times 100$$

$$\text{Gross Profit Ratio} = \left( \frac{4,70,000}{10,00,000} \right) \times 100 = 47\%$$

Gross Profit Ratio = 47%