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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).
Solution
Revenue from Operations (Net Sales) = Rs 600000
Operating Ratio = 92%
Operating Ratio= `"Operating Cost"/"Net Sales"xx 100`
`92 = "Operating Cost"/600000 xx 100`
Operating Cost =`(600000 xx 92)/100 = 552000`
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.
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