Question
116;
A trader carries an average
Inventory of one `1,00,000. His Inventory turnover
Ratio is 8 times; He Sells goods at a profit of 25% of cost. Calculate Gross
Profit Ratio
Answer:
Gross profit ratio = gross profit upon revenue from operations ×100
Gross profit ratio = 2,00,000/1,00,0000 ×100 = 20%
Cost of revenue from operation = average inventory × inventory turnover ratio
Cost of revenue from operation = 1,00,000 × 8 = 8,00,000
Gross profit = 25% of 8,00,000 = 2,00,000
Revenue from operation = cost of revenue from operations + gross profit
Revenue from operation = 8,00,000 +2,00,000 = 10,00,000
Question
117:
Calculate Gross Profit Ratio from the following data:
Average Inventory
`3,20,000; Inventory Turnover Ratio 8 Times; Average
Trade Receivables
`4,00,000; Trade Receivables Turnover Ratio 6 Times;
Cash Sales 25% of Net Sales.
Answer:
Inventory
Turnover Ratio = 8 times
Average Inventory = ` 3,20,000
Cost of Goods sold = 25,60,000
Trade Receivables Turnover Ratio = 6 times
Average Trade Receivables = ` 4,00,000
Stock
turnover ratio= Cost of Goods sold/ Average Stock = Cost of Goods
sold/3,20,000=8 Times
Net Credit Sales = 24,00,000
Total Sales = Cash Sales + Credit Sales
Total Sales = 25% of Total Sales + Credit Sales
75% of Total Sales = 24,00,000
Trade Receivables Turnover Ratio = Net Credit Sales/ Average Trade Receivables=
6=
Net Credit Sales/4,00,000
Gross Profit = Total Sales – Cost of Goods Sold
= 32,00,000 – 25,60,000 = 6,40,000
Total Sales= Gross Profit×100/ Net Sales
= 6,40,000/32,00,000×100=20%
Question
118:
(i) Revenue from Operations: Cash Sales `4,20,000;
Credit Sales `6,00,000; Return `20,000. Cost of Revenue from
Operations or Cost of Goods Sold `8,00,000. Calculate Gross Profit
Ratio.
(ii) Average Inventory
`1,60,000; Inventory Turnover Ratio is 6 Times; Selling
Price 25% above cost. Calculate Gross Profit Ratio.
(iii) Opening Inventory
`1,00,000; Closing Inventory `60,000;
Inventory Turnover Ratio 8 Times; Selling Price 25% above cost. Calculate Gross
Profit Ratio.
Answer:
(i)
Net Sales= Cash Sales+ Credit
Sales- Sales Return
=4,20,000+6,00,000-20,000=10,00,000
Cost of Goods Sold = 8,00,000
Gross Profit= Net Sales- Cost of Goods Sold
=10,00,000-8,00,000=2,00,000
Gross Profit Ratio.= Gross Profit/ Net Sales×100
=2,00,000/10,00,000×100=20%
(ii) Average Stock = 1,60,000
Stock Turnover Ratio = 6 Times
Stock
turnover ratio= Cost of Goods sold/ Average Stock
8 = Cost
of Goods sold/3,20,000
Cost of
Goods sold=9,60,000
Gross Profit = 25% on Cost
Gross Profit =25/100×9,60,000=2,40,000
Net Sales= Cost of Goods sold +Gross Profit
Gross Profit Ratio.= Gross Profit/ Net Sales×100
=2,40,000/12,00,000×100=20%
(iii) Opening Inventory = 1,00,000
Closing Inventory = 60,000
Average Inventory= Opening Inventory /Closing Inventory
Inventory turnover ratio= Cost of Goods sold/ Average Inventory
Gross Profit = 25% on Cost
Gross profit=25/100×6,40,000=1,60,000
Net Sales= Cost of Goods sold +Gross Profit
=6,40,000+1,60,000=8,00,000
Gross Profit Ratio = Gross Profit/ Net Sales × 100
= 1,60,000/8,00,000× 100 = 20%
Question
119:
Gross Profit Ratio of a company is 25%. State giving
reason, which of the following transactions will (a) increase or (b) decrease
or (c) not alter the Gross Profit Ratio.
(i) Purchases of Stock-in-Trade `50,000.
(ii) Purchases Return
`15,000.
(iii) Cash Sale of Stock-in-Trade `40,000.
(iv) Stock-in-Trade costing `20,000 withdrawn for personal use.
(v) Stock-in-Trade costing `15,000 distributed as free sample.
Answer:
|
Transactions |
Effect
on Gross Profit Ratio |
Reason |
|
(i) Purchase of
Stock-in-Trade ` 50,000 |
No Change |
Both purchases
and closing inventory will increase by ` 50,000; therefore, cost of revenue from operations will not be
affected. So, Gross Profit Ratio will remain same. |
|
(ii) Purchase
Return ` 15,000 |
No Change |
Both purchases
and closing inventory will decrease by ` 15,000; therefore, cost of revenue from operations will not be
affected. So, Gross Profit Ratio will remain same. |
|
(iii) Cash Sale
of Stock-in-Trade ` 40,000 |
No Change |
Revenue from
operations will increase by ` 40,000 and Gross
Profit will increase by 10,000 (40,000 × 25%), Therefore, both revenue from
operations and gross profit will increase by 25%. So, Gross Profit Ratio will
remain same. |
|
(iv)
Stock-in-trade costing ` 20,000 withdrawn
for personal use |
No Change |
Both purchases
and closing inventory will decrease by ` 20,000; therefore, cost of revenue from operations will not be
affected. So, Gross Profit Ratio will remain same. |
|
(v)
Stock-in-Trade costing
` 15,000 distributed as free sample |
No Change |
Both purchases
and closing inventory will decrease by ` 15,000; therefore, cost of revenue from operations will not be
affected. So, Gross Profit Ratio will remain same. |
Question
120:
Cost of Revenue from Operations (Cost of Goods Sold) `3,00,000. Operating Expenses `1,20,000. Revenue from Operations: Cash Sales `5,20,000; Return `20,000. Calculate Operating Ratio.
Answer:
Net Sales= Cost of Goods sold +Gross Profit
=5,20,000-20,000=5,00,000
Operating Cost = Cost of Goods Sold+ Operating Expenses
=3,00,000+1,20,000=4,20,000
Operating Ratio= Operating Cost/ Net Sales ×100
=4,20,000/5,00,000× 100=84%
Class : 12th | Ts Grewal solution 2022-2023
Volume 3 | Chapter 4: Accounting Ratio
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