Average Inventory Rs60,000; Inventory Turnover Ratio 8; Gross Profit 20% on revenue from operations; what will be Gross Profit?
Answer & explanation
Correct answer: option 1
Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory
8 = Cost of Revenue from Operations/60,000
Cost of revenue from operations= 4,80,000
Let Revenue from Operation=X
Gross profit =X*20/100
=X/5
Gross profit = revenue from operations - cost of operations
X/5 = X-4,80,000
480000 = X - X/5
480000 = 4X/5
4X = 2400000
X = 600000
Gross profit = X/5 means 600000/5 = ₹120000