Question

Compute Gross Profit Ratio from the following information:
Revenue from Operations, i.e., Net Sales = ₹4,00,000; Gross Profit 25% on Cost.

Answer 1

Gross Profit = 25% on Cost 

Let Cost = x

∴ Gross Profit = ${\displaystyle x\times \frac{25}{100}=\frac{25x}{100}}$

Sales = Cost + Gross Profit

${\displaystyle 400000=x+\frac{25x}{100}}$

or,${\displaystyle 400000=\frac{125x}{100}}$

or, ${\displaystyle x=\frac{400000\times 100}{125}=320000}$

Cost = x = Rs 3,20,000 

Gross Profit = Sales - Cost

= 400000 - 320000 = 80000

Gross Profit Ratio = ${\displaystyle \frac{\text{Gross Profit}}{\text{Net Sales}}\times 100}$

${\displaystyle =\frac{80000}{400000}\times 100}$ = 20%