A trading firm’s average inventory is Rs 20,000 (cost). If the inventory turnover ratio is 8 times and the firm sells goods at a profit of 20% on sale, ascertain the profit of the firm. SOLUTION Inventory Turn Over Ratio Or,8 Or, Cost of Revenue from Operations = 20,000 ❌ 8 = 1,60,000 Let Sales Price be Rs. 100 ∴ Profit is Rs.20 Hence, the Cost of Revenue from Operations = Rs. 100 - Rs. 20 = Rs. 80 If the Cost of Revenue from Operations = Rs. 100 - Rs. 20 = Rs. 80 If the Cost of Revenue from Operations is Rs. 80, then Revenue from Operations = 100 If the Cost of Revenue from Operations is Rs. 1, then Revenue from Operations = ` `\frac{100}{8}` ` If the Cost of Revenue from Operations is Rs. 1,60,000 then, Revenue from Operations = ` `\frac{100}{8}\times1,60,000` ` = 2,00,000 Now, Profit = Net Revenue from Operations - Cost of Revenue from Operations = 2,00,000 - 1,60,000 = 40,000 Alternative Method: Stoc...
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