From the following information calculate Net Sales and Gross Profit. Cost of goods sold = Rs.4,50,000 Gross Profit = 25% on Sales.

Steps to Solve

1. Understanding Gross Profit in Relation to Sales

Gross Profit is defined as Sales minus Cost of Goods Sold (COGS). Given the Gross Profit percentage, we can express Gross Profit as 25% of Net Sales.

2. Setting Up the Equation

Let ( S ) represent Net Sales. According to the problem: $$ \text{Gross Profit} = 0.25S $$

Using the relationship between Gross Profit, Sales, and COGS: $$ \text{Gross Profit} = S - \text{COGS} $$

Thus we have the equation: $$ 0.25S = S - 450000 $$

3. Solving for Net Sales

Now, we can rearrange the equation to isolate ( S ): $$ 0.25S + 450000 = S $$

Subtract ( 0.25S ) from both sides: $$ 450000 = S - 0.25S $$

This simplifies to: $$ 450000 = 0.75S $$

Now, divide both sides by ( 0.75 ): $$ S = \frac{450000}{0.75} $$

4. Calculating Net Sales

Calculate ( S ): $$ S = 600000 $$

Therefore, Net Sales is Rs. 6,00,000.

5. Calculating Gross Profit

Now substitute ( S ) to find Gross Profit: $$ \text{Gross Profit} = 0.25 \times S = 0.25 \times 600000 $$

Calculating this gives: $$ \text{Gross Profit} = 150000 $$