Ascertain Gross Profit when sales is ₹5,00,000 and Gross Profit Ratio is 25% on cost?
Answer (2)
The Gross Profit can be calculated using the sales amount and Gross Profit Ratio. Given sales of ₹5,00,000 and a Gross Profit Ratio of 25%, the Gross Profit is ₹1,00,000. This is derived from calculating the Cost of Goods Sold and applying the ratio.
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To find the Gross Profit when the sales amount is ₹5,00,000 and the Gross Profit Ratio is 25% on cost, we need to follow these steps:
Understand what Gross Profit Ratio is:
The Gross Profit Ratio is the percentage of the cost price that is added to determine the selling price. When it is mentioned as a percentage "on cost," it means the ratio is applied to the cost price to calculate the selling price.
Identify what is given:
Sales (Selling Price): ₹5,00,000
Gross Profit Ratio on cost: 25%
Calculate the Cost Price:
To find the cost price, let's set the cost price as C .
Since the Gross Profit Ratio is 25% on cost, the selling price (Sales) is 125% of the cost price.
This can be expressed with the equation: 1.25 C = 5 , 00 , 000
Solving for C , we get: C = 1.25 5 , 00 , 000 C = 4 , 00 , 000
Calculate the Gross Profit:
Gross Profit is calculated as: Gross Profit = Sales − Cost Price
Substituting the values, we get: Gross Profit = 5 , 00 , 000 − 4 , 00 , 000 Gross Profit = 1 , 00 , 000
Therefore, the Gross Profit is ₹1,00,000.
