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Question

Cost of goods sold is Rs1,20,000 Gross Loss : 1/4th on sales what is the amount of sales?

A
Rs160000
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B
Rs144000
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C
Rs96000
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D
Rs90000
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Solution

The correct option is C Rs96000

Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs.

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. Gross profit will appear on a company's income statement, and can be calculated with this formula:

Let the sales be x. Therefore, gross loss = 1/4 of sales i.e., (1/4) * x or 0.25x and cost of goods sold = 1.25x

Cost of goods sold = Rs. 120000

Sales = Cost of goods sold + Gross profit (-Gross loss)

X = 1.25x - 0.25x

X= Rs.120000 - 0.25x

X + 0.25x = Rs.120000

1.25x = Rs.120000

X = Rs. 120000 / 1.25 = Rs. 96000


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