What will be the gross profit ratio if revenue from operations is ₹4,00,000 and gross profit is 25% on cost?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- 20%.
If Gross profit is 25% on cost then goods costing ₹100 must be sold for ₹125.
If sales is ₹125 then Gross Profit is ₹25
If sales is 4,00,000 then Gross profit = 4,00,000 X 25/125
= ₹80,000
Gross Profit Ratio = Gross Profit/Net Revenue of Operations × 100
Gross profit ratio = 80,000/4,00,000 X 100
= 20%