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General Accounting Principles

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Consider the following information :

Rate of gross profit - 25% on cost of goods sold

Sales - Rs 20,00,000

Which one of the following is the amount of gross profit?

This questions was previously asked in

EPFO AO EO 2017

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Rs. 5,00,000

Rs. 6,25,000

Rs. 3,75,000

Rs. 4,00,000

Explanation:

To determine the gross profit:

Given:

- Gross Profit = 25% of Cost of Goods Sold (COGS)

- Sales = Rs 20,00,000

1. Let COGS = x

2. Therefore, Gross Profit = 0.25x

3. Total Sales = COGS + Gross Profit = ( x + 0.25x) = 20,00,000

Thus, 1.25x = 20,00,000

Solving for x :

x = 16,00,000

Therefore, the Gross Profit is:

0.25 times 16,00,000 = 4,00,000

- Option 4: Rs. 4,00,000 - Correct.

By: Abhipedia

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