Question
A company did sales of Rs.1 lakh during the year. It had
total purchases of Rs.75000 of which Rs.2000 worth was returned. The company paid Rs.2000 for carriage inward and Rs.5000 towards wages. If the inventor decreased by Rs.10000 during the year, what will be the gross profit margin of the company?Solution
Gross profit margin = Gross profit/sales For calculating Gross profit: Gross profit = Sales – COGS                        = Sales – (Opening inventory + purchases – closing inventory + other manufacturing expenses)                        = 100000 – (10000 + (75000-2000) + 2000 + 5000)                        = 10000 Gross profit margin = 10000/100000 = 10%
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