I. A retailer when fixing his selling price adds one-quarter to the cost of the article
II. The expenses of the retailer is 10% of his sales
III. The total sales is N23,000
IV. he turned over his stock five times in the year.
The net profit for the year is

anumbajp

1 year ago

pls can someone explain

ijeoma.u

1 year ago

is 10% of his sales III. The total ...
Question 1

I. A retailer when fixing his selling price adds one-quarter to the cost of the article

II. The expenses of the retailer is 10% of his sales

III. The total sales is ₦23,000

IV. he turned over his stock five times in the year.

Compute the average amount of stock in hand at cost price


₦3,860

₦3,806

₦3,680

₦3,086
Answer Details

To compute the average amount of stock in hand at cost price, we need to use the inventory turnover ratio formula:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

We can calculate the cost of goods sold using the given information:

Cost of Goods Sold = Total Sales - Gross Profit

To calculate the gross profit, we need to know the cost price of the goods sold. From statement I, we know that the selling price is 1.25 times the cost price. Therefore, the cost price is 4/5 of the selling price.

Let x be the cost price of an item. Then, the selling price is 1.25x.

The gross profit per item is:

Gross Profit = Selling Price - Cost Price = 1.25x - x = 0.25x

The expenses of the retailer are 10% of his sales, so his net profit per item is:

Net Profit = Gross Profit - Expenses = 0.25x - 0.1(1.25x) = 0.125x

The turnover rate is 5 times, which means the cost of goods sold is 5 times the average inventory.

Cost of Goods Sold = 5 * Average Inventory * x

Total Sales = Cost of Goods Sold + Gross Profit + Expenses

23,000 = 5 * Average Inventory * x + 0.25x * 5 * Average Inventory + 0.1 * 23,000

23,000 = 5x * Average Inventory * (1 + 0.25) + 0.1 * 23,000

23,000 = 6.25x * Average Inventory

Average Inventory = 23,000 / (6.25x)

Substituting the value of cost of goods sold, we get:

Average Inventory = 5 * Average Inventory * x / (6.25x)

Simplifying, we get:

Average Inventory = 4 * Total Sales / 25

Average Inventory = ₦3,680

Therefore, the average amount of stock in hand at cost price is ₦3,680.

Omo_jolaade

1 year ago

Let's break it down step by step:

Step 1: Calculate the total cost of goods sold
Given that the retailer adds one-quarter (25%) to the cost price, let's denote the cost price as x. The selling price would be 1.25x.
Total sales = N23,000. Since the selling price is 1.25x, we can set up the equation:
Total Sales = 1.25x * Number of units sold
Let's denote the total cost of goods sold as C. Then:
N23,000 = 1.25C
C = N23,000 / 1.25
C = N18,400

Step 2: Calculate the expenses
Expenses = 10% of Total Sales
Expenses = 0.1 * N23,000
Expenses = N2,300

Step 3: Calculate the net profit
Net Profit = Total Sales - Cost of Goods Sold - Expenses
Net Profit = N23,000 - N18,400 - N2,300
Net Profit = N2,300

The final answer is: N2300
so option D is the correct answer