Calculate Gross Profit from the following information.
Cash Sales - 25% of Total Sale
Purchases - 7,00,000
Credit Sales - 9,00,000
Excess of Closing Inventory over Opening Inventory- 50,000
Answer & explanation
Correct answer: option 1
COGS= Purchase - Excess of closing inventory over opening inventory
= 700000 - 50000
= 650000
Total Sales = Cash Sales + Credit Sales
Let total sales = x
x = 25% of x + 75% of x
x = 25% of x + 900000
x - 25% of x = 900000
x -25/100x = 900000
x = 900000 x 100/75
= ₹1200000
Total sales =₹1200000
Gross Profit = Sales - COGS
= 1200000 - 650000
= 550000