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Cost of Revenue from Operations (Cost of Goods Sold) Rs. 3,00,000. Operating Expenses Rs. 1,20,000. Revenue from Operations: Cash Sales Rs. 5,20,000; Return Rs. 20,000. Calculate Operating Ratio.

SOLUTION

Net Sales = Cost of Goods sold + Gross Profit
= 5,20,000 – 20,000
= 5,00,000

Operating Cost = Cost of Goods Sold+ Operating Expenses
= 3,00,000 + 1,20,000
= 4,20,000

Operating Ratio = Operating Cost / Net Sales ×100
= 4,20,000 / 5,00,000 × 100
= 84%

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