Multiple choice

Consider the following data pertaining to R Ltd. for June 2015: Opening inventory is Rs. 30,000 Closing inventory is Rs. 40,000 Purchases are Rs. 5,60,000 Returns outward is Rs. 15,000 Returns inward is Rs. 20,000 Carriage inward is Rs. 5,000

If the gross profit margin is 20% of net sales, what will be the amount of gross sales for June 2015?

  1. Rs. 6,95,000

  2. Rs. 6,75,000

  3. Rs. 5,40,000

  4. Rs. 6,68,750

  5. None of the above
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A Correct answer
Explanation

Cost of goods sold = Opening stock + Purchases + Direct expenses - Closing stock Putting the respective values in the above formula, we get COGS = 30,000 + (5,60,000 - 15,000) + 5,000 - 40,000 COGS = Rs. 5,40,000 Let the amount of net sales = x Sales = Cost of goods sold + Gross profit x = 5,40,000 + (x * 20%) Solving the above equation for x, we get x = 6,75,000 Gross sales = Net sales + Returns inward = 6,75,000 + 20,000 = Rs. 6,95,000

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