Question

Calculate Operating Ratio from the following information:
Operating Cost ₹ 6,80,000; Gross Profit 25%; Operating Expenses ₹ 80,000.

Hints:

1. Operating Cost = Cost of Revenue from Operations + Operating Expenses

₹ 6,80,000 = Cost of Revenue from Operations + ₹ 80,000

Cost of Revenue from Operations = ₹ 6,00,000

2. Revenue from Operations = ₹ 6,00,000 × 100/75 = ₹ 8,00,000.

Answer 1

Given:

Operating Cost=Rs 6,80,000

Operating Expenses=Rs 80,000 

Gross Profit Ratio=25%

Find out: Operating Ratio

Operating Cost=Cost of Revenue from Operations+Operating Expenses 

6,80,000=Cost of Revenue from Operations+80,000

Cost of Revenue from Operations=Rs 6,00,000 

Gross Profit =`1/4`th of Sales = `1/3`rd of cost

Gross Profit = `1/3 xx 600000` = Rs 200000

Gross Profit Ratio= `"Gross Profit"/"Net Sales" xx 100`

`25 = 200000/"Net Sales" xx 100`

Net Sales = RS 800000

Operating Ratio = `"Operating Cost "/"Net Sales" xx 100`

`680000/800000 xx 100 = 85 %`