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

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

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

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