Question

Operating Ratio 92%; Operating Expenses ₹94,000; Revenue from Operations ₹6,00,000; Sales Return ₹40,000. Calculate Cost of Revenue from Operations (Cost of Goods Sold).

Answer 1

$\mathrm{Revenue}\mathrm{from}\mathrm{Operations}(\mathrm{Net}\mathrm{Sales})=\mathrm{Rs}6,00,000*$

Operating Ratio = 92%

$$\begin{gathered} \mathrm{Operating}\mathrm{Ratio}=\frac{\mathrm{Operating}\mathrm{Cost}}{\mathrm{Net}\mathrm{Sales}}\times 100 \\ 92=\frac{\mathrm{Operating}\mathrm{Cost}}{6,00,000}\times 100 \\ \mathrm{Operating}\mathrm{Cost}=\frac{6,00,000\times 92}{100}=5,52,000 \end{gathered}$$

Operating Cost = Cost of Goods Sold + Operating Expenses

5,52,000 = Cost of Goods Sold + 94,000

Cost of Goods Sold = Rs 4,58,000

*Note: Sales Return will not be considered since net sales are given which means sales return have already been adjusted in the sales figure.