If there is Revenue from Operation Rs. 1,20,000 and gross profit is 2…

The correct answer is Option (3) → Rs. 20,000

Gross profit is given as a percentage of cost, not of revenue. If cost is 100, gross profit is 20 and revenue from operations is 120, so gross profit is 20/120 (one-sixth) of revenue.

Gross profit = Rs. 1,20,000 × 20/120
= Rs. 20,000

Check: cost of revenue from operations = Rs. 1,20,000 − Rs. 20,000 = Rs. 1,00,000, and 20% of Rs. 1,00,000 = Rs. 20,000.

Taking 20% of the revenue itself (Rs. 24,000) is the usual slip; that would be gross profit on sales, not on cost.