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Question
If revenue from operations is ₹ 9,00,000; gross profit is 25% on cost and operating expenses are ₹ 90,000 the operating ratio will be:
Options
100%
50%
90%
10%
Solution
If revenue from operations is ₹ 9,00,000; gross profit is 25% on cost and operating expenses are ₹ 90,000 the operating ratio will be 90%.
Explanation:
Let cost of goods sold be x.
Revenue from Operations = Cost of goods sold + Gross profit
`9,00,000 = x + (25x)/100`
`x = (9,00,000)/125 xx100`
= ₹ 7,20,000
Operating cost = Cost of good sold + Operating expenses
= ₹ 7,20,000 + ₹ 90,000
=₹ 8,10,000
Operating ratio = ₹`(8,10,000)/(9,00,000) xx10` = 90%
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