Calculate Closing Stock from the following details. Show workings clearly: Opening Stock Rs. 9,60,000, Purchases (Net) Rs. 27,20,000, Sales (Net) Rs. 39,00,000, Gross Profit 30% on... Calculate Closing Stock from the following details. Show workings clearly: Opening Stock Rs. 9,60,000, Purchases (Net) Rs. 27,20,000, Sales (Net) Rs. 39,00,000, Gross Profit 30% on Cost. Read more

Steps to Solve

1. Calculate Cost of Goods Sold (COGS)

First, we need to determine the Gross Profit in monetary terms. The Gross Profit margin is given as 30% on the Cost of Goods Sold (COGS).

So, if we consider COGS to be $x$, then:

$$ \text{Gross Profit} = 0.3x $$

The net sales provided are Rs. 39,00,000. The relationship between Sales, COGS, and Gross Profit is given by:

$$ \text{Sales} = \text{COGS} + \text{Gross Profit} $$

Substituting Gross Profit into the equation:

$$ 39,00,000 = x + 0.3x = 1.3x $$

To find COGS, rearranging gives:

$$ x = \frac{39,00,000}{1.3} $$

2. Calculate COGS

Now, we can calculate the COGS:

$$ \text{COGS} = \frac{39,00,000}{1.3} = 30,00,000 $$

3. Calculate Closing Stock

We can find Closing Stock using the formula:

$$ \text{Closing Stock} = \text{Opening Stock} + \text{Purchases} - \text{COGS} $$

Substitute the values:

• Opening Stock = Rs. 9,60,000
• Purchases = Rs. 27,20,000

So,

$$ \text{Closing Stock} = 9,60,000 + 27,20,000 - 30,00,000 $$

4. Final Calculation of Closing Stock

Now we compute the Closing Stock:

$$ \text{Closing Stock} = 9,60,000 + 27,20,000 - 30,00,000 = 7,80,000 $$