Question

Gross profit ratio of a company was 25%. Its credit revenue from operations was Rs. 20,00,000 and its cash revenue from operations was 20% of the total revenue from operations. If the indirect expenses of the company were Rs. 50,000, calculate its net profit.

• A. Rs. 5,00,000
• B. Rs. 6,25,000
• C. Rs. 6,00,000
• D. Rs. 5,75,000

Hint:

When revenue includes both credit and cash sales, set up an equation using percentages. Always deduct indirect expenses from Gross Profit to arrive at Net Profit.

Answer 1

The Correct Option is D

Step 1: Determine total revenue.
Let Total Revenue = Rs. X.
Cash Revenue = 20% of X.
Credit Revenue = Rs. 20,00,000.
\[\text{Therefore, } 20\% \times X + 20,00,000 = X\] \[0.20X + 20,00,000 = X $\Rightarrow$ 0.80X = 20,00,000\] \[X = 25,00,000\]

Step 2: Calculate Gross Profit.
Gross Profit Ratio = 25% of Revenue.
\[Gross Profit = 25\% \times 25,00,000 = 6,25,000\]

Step 3: Subtract indirect expenses.
\[Net Profit = Gross Profit - Indirect Expenses = 6,25,000 - 50,000 = \text{Rs. } 5,75,000\]

Final Answer: \[\boxed{\text{Rs. } 5,75,000}\]