ABC holds an average inventory of ` 36,000(CP) with an inventory turnover of 5 times. If the firm makes a gross profit of 25% on sales, find the total sales of the company

Question

Quizplus · Accepted Answer

The total sales can be calculated by first determining the cost of goods sold (COGS) and then using the gross profit margin to find the sales. With an inventory turnover of 5 times, COGS = 36,000 * 5 = 180,000. Given a gross profit of 25%, it means the cost represents 75% of sales. So, sales = COGS / 75% = 180,000 / 0.75 = 240,000.

ABC Holds an Average Inventory of ` 36,000(CP) with an Inventory