Question

Following is the statement of profit and loss of Padma Ltd. for the year ended 31st March, 2018. Calculate the operating cost ratio.

Statement of Profit and Loss
Particulars	Note No.	Amount ₹
I. Revenue from operations		15,00,000
II. Other Income		40,000
III. Total revenue (I+II)		15,40,000
IV. Expenses:
Purchases of Stock-in-trade		8,60,000
Changes in inventories		40,000
Employee benefits expense (Salaries)		1,60,000
Other expenses	1	1,70,000
Total expenses		12,30,000
V. Profit before tax (III-IV)		3,10,000

Notes to Accounts-

Particulars	Amount ₹
1. Other expenses
Office and administrative expenses	50,000
Selling and distribution expenses	90,000
Loss on sale of furniture	30,000
	1,70,000

Answer 1

Operating cost Ratio = `"Operating cost"/"Revenue from operation" xx 100`

Operating cost = Cost of revenue from operations + Operating expenses.

Cost of revenue from operations = Purchase + Change in inventory + Direct Expenses

= 8,60,000 + 40,000 + Nil

= Rs. 9,00,000

Operating Expenses = Salaries + Office & Administration Expenses + Selling+Distribution Expenses

= 1,60,000 + 50,000 + 90,000

= Rs. 3,00,000

Operating cost = 9,00,000 + 3,00,000

= Rs, 12,00,000

Operating cost Ratio = `1200000/1500000 xx 100` = 80%