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Question
Opening Inventory ₹ 75,000; Closing Inventory ₹ 1,05,000; Inventory Turnover Ratio 6; Gross Profit 20% on cost; what will be Gross Profit?
Options
₹ 1,35,000
₹ 1,08,000
₹ 90,000
₹ 18,000
MCQ
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Solution
₹ 1,08,000
Explanation:
Average Inventory = `("Opening Inventory" + "Closing Inventory")/2`
= `(75,000 + 1,05,000)/2`
= `(1,80,000)/2`
= ₹ 90,000
Inventory Turnover Ratio = `"Cost of Revenue from operation"/"Average Inventory"`
6 = `("Cost of Revenue from operation")/(90,000)`
Cost of Revenue from operation = 90,000 × 6
= ₹ 5,40,000
Gross profit = 20% of Cost
= `20/100 xx 5,40,000`
= ₹ 1,08,000
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