Calculate Inventory Turnover Ratio in each of the following alternative cases:
Case 1: Cash Sales 25% of Credit Sales; Credit Sales ₹3,00,000; Gross Profit 20% on Revenue from Operations, i.e., Net Sales; Closing Inventory ₹1,60,000; Opening Inventory ₹40,000.
Case 2: Cash Sales 20% of Total Sales; Credit Sales ₹4,50,000; Gross Profit 25% on Cost; Opening Inventory ₹37,500; Closing Inventory ₹1,12,500.

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Solution

Case 1

Credit Sales = 3,00,000

Cash sales = 25% of Credit Sales

Total Sales = Cash Sales + Credit Sales

= 3,00,000 + 75,000 = 3,75,000

Gross Profit = 20% on Sales

Cost of Goods Sold = Total Sales − Gross Profit

= 3,75,000 − 75,000 = 3,00,000

Case 2

Let Total Sales = x

Total Sales = Cash Sales + Credit Sales

Gross Profit = Sales − Cost of Goods Sold

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Similar questions

Q. (i) Revenue from Operations: Cash Sales ₹4,20,000; Credit Sales ₹6,00,000; Return ₹20,000. Cost of Revenue from Operations or Cost of Goods Sold ₹8,00,000. Calculate Gross Profit Ratio.
(ii) Average Inventory ₹1,60,000; Inventory Turnover Ratio is 6 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.
(iii) Opening Inventory ₹1,00,000; Closing Inventory ₹60,000; Inventory Turnover Ratio 8 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.

Q. Calculate Trade Receivables Turnover Ratio in each of the following alternative cases:
Case 1: Net Credit Sales ₹4,00,000; Average Trade Receivables ₹1,00,000.
Case 2: Revenue from Operations (Net Sales) ₹30,00,000; Cash Revenue from Operations, i.e., Cash Sales ₹6,00,000; Opening Trade Receivables ₹2,00,000; Closing Trade Receivables ₹6,00,000.
Case 3: Cost of Revenue from Operations or Cost of Goods Sold ₹3,00,000; Gross Profit on Cost 25%; Cash Sales 20% of Total Sales; Opening Trade Receivables ₹50,000; Closing Trade Receivables ₹1,00,000.
Case 4: Cost of Revenue from Operations or Cost of Goods Sold ₹4,50,000; Gross Profit on Sales 20%; Cash Sales 25% of Net Credit Sales, Opening Trade Receivables ₹90,000; Closing Trade Receivables ₹60,000.

Cash Revenue from Operations (Cash Sales) Rs. 2,00,000

Credit Revenue from Operations (Credit Sales) Rs. 4,00,000

Gross Profit Rs. 1,00,000

Inventory Turnover Ratio 5 Times

Calculate the value of Opening and Closing Inventory in eash of the following alternative cases :

Case I If closing inventory was Rs. 80,000 in excess of opening inventory.

Case II If closing inventory was 3 times that in the beginnning.

Case III If closing inventory was 3 times more than that in the beginning.

Case IV If opening inventory was $\frac{1}{3}$ rd of inventory at the end.

Q. Calculate Gross Profit Ratio from the following data:
Cash Sales are 20% of Total Sales; Credit Sales are ₹5,00,000; Purchases are ₹4,00,000; Excess of Closing Inventory over Opening Inventory ₹25,000.

Opening Inventory Rs. 29,000; Closing Inventory Rs. 31,000; Revenue from Operations (Sales) Rs. 3,20,000; Gross Profit Ratio 25% on Revenue from Operations.
Calculate:
(i) Inventory Turnover Ratio and
(ii) Average Age of Inventory.

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