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The total cost of goods available for sale with a company during the current year is Rs. 1200000 and the total sales during the period are Rs, 1300000. If the gross profit margin of the company is 33 1/3% on cost, the closing inventory during the current year is A) 4,00,000 B) 3,00,000 C) 2,25,000 D) 2,60,000?
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The total cost of goods available for sale with a company during the c...
Calculation of closing inventory using gross profit margin method

Total cost of goods sold (COGS) = Total sales / (1 + Gross profit margin)
= 1300000 / (1 + 33.33%)
= 975000

Closing inventory = Total cost of goods available for sale - COGS
= 1200000 - 975000
= 225000

Therefore, the correct answer is option C) 2,25,000.

Explanation:
The question provides the total cost of goods available for sale and total sales during the current year. To calculate the closing inventory, we need to use the gross profit margin method, which is based on the assumption that the gross profit margin remains constant across all sales and inventory.

The first step is to calculate the cost of goods sold (COGS) using the gross profit margin. The gross profit margin is given as 33 1/3% on cost, which means that the markup on cost is 33 1/3% or the selling price is 133 1/3% of the cost price. Therefore, the formula for calculating COGS is:

COGS = Total sales / (1 + Gross profit margin)

Substituting the given values, we get:

COGS = 1300000 / (1 + 33.33%)
= 975000

The next step is to calculate the closing inventory, which is the difference between the total cost of goods available for sale and the COGS. Therefore, we have:

Closing inventory = Total cost of goods available for sale - COGS
= 1200000 - 975000
= 225000

Thus, the closing inventory during the current year is Rs. 225000.
Community Answer
The total cost of goods available for sale with a company during the c...
Goods available for sale =1200000....sales=1300000.........profit is 33 1/3 on cost sooo 1/4on sales 1300000×1/4= 325000...1300000-325000=975000 cost of goods sold........closing stock = goods available- cost of goods sold = 1200000-975000=225000
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The total cost of goods available for sale with a company during the current year is Rs. 1200000 and the total sales during the period are Rs, 1300000. If the gross profit margin of the company is 33 1/3% on cost, the closing inventory during the current year is A) 4,00,000 B) 3,00,000 C) 2,25,000 D) 2,60,000?
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The total cost of goods available for sale with a company during the current year is Rs. 1200000 and the total sales during the period are Rs, 1300000. If the gross profit margin of the company is 33 1/3% on cost, the closing inventory during the current year is A) 4,00,000 B) 3,00,000 C) 2,25,000 D) 2,60,000? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The total cost of goods available for sale with a company during the current year is Rs. 1200000 and the total sales during the period are Rs, 1300000. If the gross profit margin of the company is 33 1/3% on cost, the closing inventory during the current year is A) 4,00,000 B) 3,00,000 C) 2,25,000 D) 2,60,000? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The total cost of goods available for sale with a company during the current year is Rs. 1200000 and the total sales during the period are Rs, 1300000. If the gross profit margin of the company is 33 1/3% on cost, the closing inventory during the current year is A) 4,00,000 B) 3,00,000 C) 2,25,000 D) 2,60,000?.
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