A trader carries an average inventory of Rs. 60,000 . His inventory turnover ratio is 12 times. If he sells goods at a profit of 20\% on revenue from - Accountancy MCQ CUET Accountancy 2025 24 May Shift 1 2026 | ExamTest.live

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A trader carries an average inventory of Rs. 60, 000 . His inventory turnover ratio is 12 times. If he sells goods at a profit of 20% on revenue from operations (sales), calculate the value of gross profit.

Solution & Step-by-step Explanation

Given parameters: Average Inventory = Rs. 60, 000 Inventory Turnover Ratio = 12 times First, determine the Cost of Revenue from Operations (COGS): Inventory Turnover Ratio = \frac{Cost of Revenue from Operations}{Average Inventory} 12 = \frac{Cost of Revenue from Operations}{60 , 000} Cost of Revenue from Operations = 12 \times 60, 000 = Rs. 7, 20, 000 The profit is given as 20% on Revenue from Operations (Sales). Let Sales be S . Gross Profit = 0.20 \times S We know: Sales - Gross Profit = COGS S - 0.20 S = 7, 20, 000 0.80 S = 7, 20, 000 S = \frac{7 , 20 , 000}{0.80} = 9, 00, 000 Now calculate Gross Profit: Gross Profit = 9, 00, 000 - 7, 20, 000 = Rs. 1, 80, 000

Try it yourself before checking the explanation above.

A trader carries an average inventory of Rs. 60, 000 . His inventory turnover ratio is 12 times. If he sells goods at a profit of 20% on revenue from operations (sales), calculate the value of gross profit.

80,000

2,80,000

1,80,000

60,000

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