Question
Company Victory commenced operations and it purchased g
oods worth ₹1,00,000 . During the year, the it could make sales worth ₹90,000. If the company’s m argin on cost is 20%, what is its c losing Inventory?Solution
Explanation :
Let Cost = 100, Margin = 20%, so Sales = ₹120.
Cost to Sales ratio = 100 / 120 = 5/6
Given Sales = ₹90,000 → Cost of Goods Sold = 90,000 × 5/6 = ₹75,000
Purchases = ₹1,00,000
Closing Inventory = Opening Inventory + Purchases – Cost of goods sold = 0 + 1,00,000 - 75,000 = ₹25,000
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