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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?

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? Correct Answer Rs. 4,00,000

The correct option is 4 i.e. Rs. 4,00,000.

  • Sales = Cost of goods sold (COGS) + Profit
  • Let us assume that COGS = 100
  • It means profit = 25 (being 25% of 100)
  • Therefore sales =125 (100+25)
  • We are given sales=Rs 20,00,000.
  • If sales of Rs. 20,00,000 = 125
  • Then the value of 25 should be
  • Profit = (20,00,000/125) × 25 = Rs. 4,00,000

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