Goods costing Rs. 80,000/- were sold at a profit of 20% on sales. The amount of gross profit on this sales is.........
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 20,000/-
A profit stated on sales is a percentage of the selling price, not of cost. Turn it into a rate on cost first.
Let sales = 100; gross profit = 20; cost = 100 − 20 = 80
Gross profit on cost = 20/80 = 25%
Gross profit = Rs. 80,000 × 25/100 = Rs. 20,000
Check: sales = Rs. 80,000 + Rs. 20,000 = Rs. 1,00,000, and 20% of Rs. 1,00,000 = Rs. 20,000
Rs. 16,000 is 20% of the cost, the slip of reading "20% on sales" as "20% on cost".