Question

(i) Cost of Revenue from Operations (Cost of Goods Sold) ₹2,20,000; Revenue from Operations (Net Sales) ₹3,20,000; Selling Expenses ₹12,000; Office Expenses ₹8,000; Depreciation ₹6,000. Calculate Operating Ratio.
(ii) Revenue from Operations, Cash Sales ₹4,00,000; Credit Sales ₹1,00,000; Gross Profit ₹1,00,000; Office and Selling Expenses ₹50,000. Calculate Operating Ratio.

Answer 1

(i) Operating Expenses = Selling Expenses + Office Expenses + Depreciation

= 12000 + 8000 + 6000 = 26000

Cost of Goods Sold = 2,20,000

Operating Cost = Cost of Goods Sold + Operating Expenses

Operating Cost = 2,20,000 + 26,000 = 2,46,000

Sales = 3,20,000

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

`= 246000/320000 xx 100 = 76.875 %`

(ii) Net Sales = Cash Sales + Credit Sales

= 400000 + 100000 = 500000

Cost of Goods Sold = Net Sales - Gross Profit

= 500000 - 100000 = 400000

Operating Expenses = Office and Selling Expenses = 50,000

Operating Cost = Cost of Goods Sold + Operating Cost

= 400000 + 50000 = 450000

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

`= 450000/500000 xx 100 = 90%`