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Credit sales =500000 , purchase = 300000 ,carriage inwards = 10000 , decrease in inventory = 10000 , return outward =10000 , wages = 50000 , rate of cash sales to credit sales = 4:1 , find gross profit ratio ?
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Credit sales =500000 , purchase = 300000 ,carriage inwards = 10000 , d...
Calculation of Gross Profit Ratio
Step 1: Calculation of Cost of Goods Sold (COGS)
- COGS = Beginning Inventory + Purchases + Carriage Inwards - Ending Inventory
- Beginning Inventory = Ending Inventory - Decrease in Inventory = X - 10000
- COGS = (X - 10000) + 300000 + 10000 - X = 310000
Step 2: Calculation of Gross Profit
- Gross Profit = Sales - COGS
- Sales = Credit Sales + Cash Sales = 500000 + (4/1) * 500000 = 2500000
- Gross Profit = 2500000 - 310000 = 2190000
Step 3: Calculation of Gross Profit Ratio
- Gross Profit Ratio = (Gross Profit / Sales) * 100
- Gross Profit Ratio = (2190000 / 2500000) * 100 = 87.6%
Explanation
The gross profit ratio is a profitability ratio that measures the amount of gross profit earned by a business for each dollar of sales. It is expressed as a percentage and is calculated by dividing gross profit by sales.
In this problem, we are given the credit sales, purchases, carriage inwards, decrease in inventory, return outward, and wages. We are also given that the rate of cash sales to credit sales is 4:1. Using this information, we can calculate the COGS, gross profit, and gross profit ratio.
First, we calculate the COGS by adding purchases and carriage inwards, subtracting the decrease in inventory, and adjusting for the beginning inventory. Next, we calculate the sales by adding credit sales and cash sales (which we calculate based on the given rate). Finally, we calculate the gross profit by subtracting the COGS from the sales and the gross profit ratio by dividing the gross profit by the sales and multiplying by 100.
The resulting gross profit ratio of 87.6% indicates that the business is earning a high percentage of gross profit for each dollar of sales. This may be a positive sign for investors and stakeholders, as it suggests that the business is effectively managing its costs and generating strong profits.
Community Answer
Credit sales =500000 , purchase = 300000 ,carriage inwards = 10000 , d...
CREDIT SALES= 5,00,000
CASH SALES\CREDIT SALES=4:1
CASH SALES=20,00,000
TOTAL\NET SALES = 25,00,000
DECREASE IN INVENTORY=10,000
OPENING STOCK - CLOSING STOCK = 10,000___________EQ(1)
GROSS PROFIT= CLOSING STOCK+ NET SALES - OPENING STOCK - NET PURCHASES - WAGES -CARRIAGE INWARDS
GROSS PROFIT= CLOSING STOCK + 25,00,000 - OPENING STOCK - 2,90,000 - 50,000 - 10,000
GROSS PROFIT + OPENING STOCK - CLOSING STOCK = 21,50,000
(from EQ 1 )
GROSS PROFIT + 10,000 = 21,50,000
GROSS PROFIT = 21,40,000
GROSS PROFIT RATIO = (GROSS PROFIT \ NET SALES)100
GROSS PROFIT RATIO = (21,40,000 \ 25,00,000)100
GROSS PROFIT RATIO = (0.856)100
GROSS PROFIT RATIO = 85.6
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Credit sales =500000 , purchase = 300000 ,carriage inwards = 10000 , decrease in inventory = 10000 , return outward =10000 , wages = 50000 , rate of cash sales to credit sales = 4:1 , find gross profit ratio ?
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Credit sales =500000 , purchase = 300000 ,carriage inwards = 10000 , decrease in inventory = 10000 , return outward =10000 , wages = 50000 , rate of cash sales to credit sales = 4:1 , find gross profit ratio ? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Credit sales =500000 , purchase = 300000 ,carriage inwards = 10000 , decrease in inventory = 10000 , return outward =10000 , wages = 50000 , rate of cash sales to credit sales = 4:1 , find gross profit ratio ? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Credit sales =500000 , purchase = 300000 ,carriage inwards = 10000 , decrease in inventory = 10000 , return outward =10000 , wages = 50000 , rate of cash sales to credit sales = 4:1 , find gross profit ratio ?.
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