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Question
Revenue from Operations (Sales) ₹ 8,00,000; G.P. 25% on Cost; Office Exp. ₹ 25,000; Selling Exp. ₹ 15,000; Loss on Sale of Plant ₹ 10,000. Operating Ratio will be ______.
Options
85%
86.25%
80%
81.25%
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Solution
Revenue from Operations (Sales) ₹ 8,00,000; G.P. 25% on Cost; Office Exp. ₹ 25,000; Selling Exp. ₹ 15,000; Loss on Sale of Plant ₹ 10,000. Operating Ratio will be 85%.
Explanation:
Operating Ratio = `"Cost of Revenue from Operations + Operating Expenses"/"Revenue from Operation" xx 100`
If Cost is 100, G.P. will be ₹ 25 and Revenue from Operations will be ₹ 125
Hence, Cost of Revenue from Operations = `8,00,000 xx 100/125`
= ₹ 6,40,000
Operating Expenses = Office Exp. + Selling Exp.
= 25,000 + 15,000
= ₹ 40,000
Operating Ratio = `(6,40,000 + 40,000)/(8,00,000) xx 100`
= `(6,80,000)/(8,00,000) xx 100`
= 85%
