Query Detail : RBI Grade B Phase II
Referring to the previous question, COGS is Cost of Goods sold ( which includes all costs from Raw material to Sales Cost), Let's Say this is just Cost Price for a Product. Now when the company will sell the product at a higher rate , that means the Selling Price (Revenue) is more than Cost Price, It will make profit. Profit is always being calculated on Cost Price.
For an example, If the Cost Price of a product is 100 and he books 20% profit, that means he sold the product at 120.
If the company sold the product at 100 (Selling Price) and booked profit of 20%, that means 120% of Cost Price = Selling Price.
Which implies, 120% of Cost price = 100 (as per the example)
=> Cost Price = 100/120*100= 83.34
This means Cost Price is not 80, It is 83.34. Kindly help me, If I have made any wrong assumption.
JYOTIPRAKASH, August 25th 2020,
RBI Grade B Phase II