Question

Calculate Gross Profit Ratio from the following information:

Revenue from Operations ₹ 10,00,000; Purchases ₹ 3,60,000; Carriage Inwards ₹ 50,000; Employee benefit Expenses ₹ 1,00,000 (including Wages of ₹ 60,000); Opening Inventory ₹ 60,000 and Average Inventory ₹ 80,000.

Answer 1

Revenue from Operations = Rs 10,00,000

Cost of Revenue from Operations = Purchases + Opening Inventory + Direct Expenses – Closing Inventory

= 3,60,000 + 60,000 + (50,000 + 60,000) – 1,00,000

= 3,60,000 + 60,000 + 1,10,000 – 1,00,000

= 5,30,000 – 1,00,000

= 4,30,000

Average Inventory = ${\displaystyle \frac{\text{Opening Inventory}+\text{Closing Inventory}}{2}}$

${\displaystyle 80,000=\frac{60,000+\text{Closing Inventory}}{2}}$

80,000 × 2 = 60,000 + Closing Inventory

1,60,000 = 60,000 + Closing Inventory

Closing Inventory = 1,60,000 – 60,000

∴ Closing Inventory = 1,00,000

Gross Profit = Revenue from Operations – Cost of Revenue from Operations

= 10,00,000 – 4,30,000

= 5,70,000

Gross Profit Ratio = ${\displaystyle \frac{\text{Gross Profit}}{\text{Revenue from Operations}}\times 100}$

= ${\displaystyle \frac{5,70,000}{10,00,000}\times 100}$

= 57%