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I didn't understand this Why selling price is multiplied with purchase units Gross profit will come from sales units multiplied with selling price ,is anything wrong Gross profit ratio = gross profit ÷ selling price i.e selling price total = 1512000 Please explain this
Answers (6)
In this problem, we don't know Gross profit % and purchase price for individual units but Gross profit rate is same. By multiplying purchase units with selling price will give total selling price and deducting Total purchase cost will give gross profit for purchase units (this is not real gross profit) . Why we finding Gross profit for purchase units is to find opening stock. In this question we have selling price for individual unit, from that by deducting profit margin will give purchase price per units. From that we can easily identify closing stock
here it is not given in question that cost of units sold as we know gross profit = sales - cost. but here we don't know cost so we can't find gross profit. but in question they gave that assume gross profit ratio constant. and they gave that current purchases in units individually and cost in total. as gross profit is constant if we sale these units we will get same gross profit ratio. for finding gross profit ratio they multiplied purchased units with respective selling price it results in total sales value of purchased units. in question they already gave cost. by subtrating cost from sales we can get profit. by dividing profit by sales we will get gp ratio.
Here , the main thing is to find purchase price per unit, right 👍 Okay now for the time being - let's only talk about product A so that you can easily understand:- To start with, Purchased(U) = 6000 and we aldready know that closing stock of 600Units. so, 6000(-)600 = 5400🫢 But there given sales units= 6120 🫣🧐🤔 just think how it could be possible........ So then you should understand that there is an opening stock. So here to summarise :- the units that were sold 6120 not only includes purchased units, but also it includes opening stock. May be that opening stock has different cost and margin. And while calculating GP ratio, closing stock shouldn't include. That's why only purchase units taken for calculating total selling price as if there is only purchased goods are there and sales price per unit given , with that you can find the purchase price per unit and finally with the purchase price per unit - you can find cost of opening & closing stock. And at last , those amounts will be posted in the Dep Trad a/c. after all the adjustments, final gross profit which is a balancing fig. (Or else) you can apply gp Margin on sales value 2,44,800 to get Gross profit . Actually this is a psyco sum 😂 I think the way i explained is a little bit clumsy, may be a lot clumsy 😅😂 So after reading this explanation, once think in your mind by taking a small value example.
Thread Starter
Nayani AgarwalI understood Thank you all
Could you please tell me what you understood finally? Give a short explanation
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