## Opening Inventory Rs. 80,000; Purchases Rs. 4,30,900; Direct Expenses Rs. 4,000; Closing Inventory Rs. 1,60,000; Administrative Expenses Rs. 21,100; Selling and Distribution Expenses Rs. 40,000; Revenue from Operations, i.e., Net Sales Rs. 10,00,000. Calculate Inventory Turnover Ratio; Gross Profit Ratio; and Opening Ratio.

SOLUTION

(i) Opening Inventory = 80,000
Closing Inventory = 1,60,000
Cost of Goods Sold = Opening Inventory + Purchases + Direct Expenses − Closing Inventory
= 80,000 + 4,30,900 + 4,000 − 1,60,000
= 3,54,900

Average Inventory = Opening Inventory + Closing Inventory / 2
= 80,000 + 90,000 / 2
= 1,20,000

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
= 3,54,000 / 1,20,000
= 2.96 Times

(ii) Sales = 10,00,000
Gross Profit = Net Sales − Cost of Goods Sold
= 10,00,000 − 3,54,900
= 6,45,100

Gross Profit Ratio = Gross profit × 100 / Net Sales
= 645000 × 100 / 10,00,000

= 64.51%

(iii)Operating Expenses = Administration Expenses + Selling and Distribution Expenses
= 21,100 + 40,000
= 61,100

Operating Cost = Cost of Goods Sold+ Operating Expenses
= 3,54,900 + 61,100
= 4,16,000

Operating Ratio = Operating Cost /  Net Sales × 100
= 4,16,000 / 10,00,000 × 100
= 41.6%