What will be the amount of gross profit of a firm if its average
inventory is ₹60,000, inventory turnover ratio is 5 times, and the selling price is 20% above cost?

[0.88 marks]

₹3,00,000

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₹75,000

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₹60,000

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₹1,00,000

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Solution

The correct option is B ₹75,000
Stock Turnover Ratio $= \frac{Cost of Goods Sold}{Average Inventory}$

$5 = \frac{Cost of Goods Sold}{₹ 60, 000}$

₹3,00,000 = Cost of Goods Sold

Gross Profit = ₹3,00,000 × 25%

= ₹75,000

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Similar questions

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What will be the amount of gross profit of a firm if its average inventory is ₹60,000, inventory turnover ratio is 5 times, and the selling price is 20% above cost? [0.88 marks]

The correct option is B ₹75,000Stock Turnover Ratio =Cost of Goods SoldAverage Inventory 5=Cost of Goods Sold₹ 60,000 ₹3,00,000 = Cost of Goods Sold Gross Profit = ₹3,00,000 × 25% = ₹75,000

What will be the amount of gross profit of a firm if its average
inventory is ₹60,000, inventory turnover ratio is 5 times, and the selling price is 20% above cost?

[0.88 marks]

The correct option is B ₹75,000
Stock Turnover Ratio $= \frac{Cost of Goods Sold}{Average Inventory}$

$5 = \frac{Cost of Goods Sold}{₹ 60, 000}$

₹3,00,000 = Cost of Goods Sold

Gross Profit = ₹3,00,000 × 25%

= ₹75,000