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Question
What will be the amount of gross profit of a firm if its average inventory is ₹ 80,000, Inventory turnover ratio is 6 times, and the Selling price is 25% above cost?
Options
₹ 1,20,000
₹ 1,60,000
₹ 2,00,000
None of the above
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Solution
₹ 1,20,000
Explanation:
Inventory Turnover Ratio = `"Cost of Revenue from Opration"/"Average Inventory"`
6 = `("Cost of Revenue from Opration")/(80,000)`
Cost of Revenue from Operation = 80,000 × 6
= ₹ 4,80,000
Gross Profit = 25% of Cost
= `25/100 xx 4,80,000`
= ₹ 1,20,000
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RELATED QUESTIONS
What is meant by 'Activity Ratios'?
From the following information, calculate the inventory turnover ratio: Revenue from operations Rs. 16,00,000; Average Inventory Rs. 2,20,000; Gross Loss Ratio 5%.
Hint: Cost of Revenue from Operations = Revenue from Operations + Gross Loss
= ₹ 16,00,000 + ₹ 80,000 (ie, 5% of ₹ 16,00,000) = ₹ 16,80,000.
From the following information obtained from the books of Kundan Ltd., calculate the inventory turnover ratio for the years 2015-16 and 2016-17:
| 2015-16 (Rs) | 2016-17(Rs) | |
| Inventory on 31st March | 7,00,000 | 17,00,000 |
| Revenue from operations (Gross Profit is 25% on Cost of Revenue from Operations) | 50,00,000 | 75,00,000 |
In the year 2015-16, inventory increased by Rs 2,00,000.
The quick ratio of a company is 1.5: 1. A state with reason which of the following transactions would
i. increase:
ii. decrease or
iii. not change the ratio
a. Paid rent Rs 3,000 in advance.
b. Trade receivables included a debtor Shri Ashok who paid his entire amount due Rs 9,700.
Choose the appropriate alternative from the given options:
Which of the following is not an activity ratio?
| Inventory in the beginning | ₹ 30,000 |
| Inventory at the end | ₹ 50,000 |
| Net Purchases | ₹ 5,00,000 |
| Wages | ₹ 25,000 |
| Salaries | ₹ 40,000 |
| Revenue from operations | ₹ 8,00,000 |
| Carriage Inwards | ₹ 5,000 |
| Returns Outwards | ₹ 30,000 |
Calculate Inventory Turnover Ratio
Cost of goods sold =____.
The 'Inventory Turnover Ratio' from the following information will be:
| (₹) | |
| Revenue from Operations | 12,00,000 |
| Average Inventory | 2,00,000 |
| Gross loss ratio | 20% |
If revenue from operations is ₹ 9,00,000; gross profit is 25% on cost and operating expenses are ₹ 90,000 the operating ratio will be:
From the following information, calculate the value of opening and closing inventory:
Inventory Turnover Ratio - 4 times.
Gross Profit = 20% on Revenue from Operations.
Revenue from Operations = ₹ 10,00,000.
Opening inventory is 25% of the inventory at the end.
