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Calculate gross profit if rate of gross profit is 20percent on sales and cost of goods is 120000
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Calculate gross profit if rate of gross profit is 20percent on sales a...
Calculating Gross Profit using the Gross Profit Rate
Calculating the gross profit using the gross profit rate involves using a percentage of the sales revenue to determine the gross profit. The formula for calculating gross profit using the gross profit rate is:
Gross Profit = Gross Profit Rate x Sales Revenue
Step 1: Calculate the Gross Profit Rate
The gross profit rate is expressed as a percentage of the sales revenue. To calculate the gross profit rate, we divide the gross profit by the sales revenue and multiply the result by 100. Using the information provided, we can calculate the gross profit rate as follows:
Gross Profit Rate = Gross Profit / Sales Revenue x 100
Given that the gross profit rate is 20%, we can assume that the gross profit is 20% of the sales revenue. Therefore:
Gross Profit = 20% x Sales Revenue
Step 2: Calculate the Gross Profit
Using the formula above, we can calculate the gross profit as:
Gross Profit = 20% x Sales Revenue = 0.20 x Sales Revenue
Step 3: Calculate the Sales Revenue
Using the cost of goods sold, we can calculate the sales revenue as follows:
Sales Revenue = Cost of Goods Sold / (1 - Gross Profit Rate)
Substituting the values we have:
Sales Revenue = 120,000 / (1 - 0.20) = 120,000 / 0.80 = 150,000
Step 4: Calculate the Gross Profit
Now that we have calculated the sales revenue, we can use the formula from Step 2 to calculate the gross profit:
Gross Profit = 0.20 x 150,000 = 30,000
Step 5: Interpretation of Results
The gross profit for this business is $30,000, which represents 20% of the sales revenue. This means that for every dollar in sales revenue, the business is earning $0.20 in gross profit. This information is useful for analyzing the profitability of the business and making decisions about pricing, cost management, and other strategic issues.
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Calculate gross profit if rate of gross profit is 20percent on sales and cost of goods is 120000 for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Calculate gross profit if rate of gross profit is 20percent on sales and cost of goods is 120000 covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Calculate gross profit if rate of gross profit is 20percent on sales and cost of goods is 120000.
Calculate gross profit if rate of gross profit is 20percent on sales and cost of goods is 120000 for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Calculate gross profit if rate of gross profit is 20percent on sales and cost of goods is 120000 covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Calculate gross profit if rate of gross profit is 20percent on sales and cost of goods is 120000.
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