Question

Revenue from Operations ₹ 6,00,000 ; Gross Profit 20%; Office Expenses ₹ 30,000; Selling Expenses ₹ 48,000. Calculate Operating Ratio.

Options

• 80%

• 85%

• 96.33%

• 93%

Answer 1

93%

Explanation:

Gross Profit = 20%

= `20/100 xx 6,00,000`

= ₹ 1,20,000

Cost of Revenue from Operations = Revenue from Operations − Gross Profit

= 6,00,000 − 1,20,000

= ₹ 4,80,000

Operating Expenses = Office Expenses + Selling Expenses

= 30,000 + 48,000

= ₹ 78,000

Operating Ratio = `("Cost of Revenue from Operations" + "Operating Expenses")/"Revenue from Operations" xx 100`

= `(4,80,000 + 78,000)/(6,00,000) xx 100`

= `(5,58,000)/(6,00,000) xx 100`

= 93%