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Question 120 Chapter 4 of +2-B
Operating Ratio
120. Calculate Operating Profit Ratio, in each of the following alternative
cases:
Case 1: Revenue from Operations Net Sales Rs. 10,00,000; Operating Profit
Rs. 1,50,000.
Case 2: Revenue from Operations Net Sales Rs. 6,00,000; Operating Cost
Rs. 5,10,000.
Case 3: Revenue from Operations Net Sales Rs. 3,60,000; Gross Profit 20%
on Sales; Operating Expenses Rs. 18,000
Case 4: Revenue from Operations Net Sales Rs. 4,50,000; Cost of Revenue
from Operations Rs. 3,60,000; Operating Expenses Rs. 22,500.
Case 5: Cost of Goods Sold, i.e., Cost of Revenue from Operations Rs.
8,00,000; Gross Profit 20% on Sales; Operating Expenses Rs.
50,000.
Case I:
| Net Sales | = | Rs. 10,00,000 |
| Operating Profit | = | Rs. 1,50,000 |
| Operating Ratio | = | Operating Cost | X | 100 |
| Net Sales |
| Operating Ratio | = | Rs. 1,50,000 | X | 100 |
| Rs. 10,00,000 | ||||
| = | 15% |
Case II:
| Net Sales | = | Rs. 6,00,000 |
| Operating Cost | = | Rs. 5,10,000 |
| Operating Profit | = | Net Sales - Operating Cost |
| = | Rs. 6,00,000 – Rs. 5,10,000 | |
| = | Rs. 90,000 |
| Operating Ratio | = | Operating Cost | X | 100 |
| Net Sales |
| Operating Ratio | = | Rs. 90,000 | X | 100 |
| Rs. 6,00,000 | ||||
| = | 15% |
Case III:
| Net Sales | = | Rs. 3,60,000 |
| Gross Profit | = | 20% on Sales |
| Gross Profit | = | 20 | X | Rs.3,60,000 |
| 100 | ||||
| = | Rs. 72,000 |
| Operating Profit | = | Gross Profit - Operating Cost |
| = | Rs. 72,000 – Rs. 18,000 | |
| = | Rs. 54,000 |
| Operating Ratio | = | Operating Cost | X | 100 |
| Net Sales |
| Operating Ratio | = | Rs. 54,000 | X | 100 |
| Rs. 3,60,000 | ||||
| = | 15% |
Case IV:
| Net Sales | = | Rs. 4,50,000 |
| Cost of Goods Sold | = | Rs. 3,60,000 |
| Operating Expenses | = | Rs. 3,60,000 |
| Operating Profit | = | Gross Profit - Operating Cost |
| = | Rs. 4,50,000 – Rs. 3,60,000 – Rs. 22,500 | |
| = | Rs. 67,500 |
| Operating Ratio | = | Operating Cost | X | 100 |
| Net Sales |
| Operating Ratio | = | Rs. 67,500 | X | 100 |
| Rs. 4,50,000 | ||||
| = | 15% |
Case V:
| Gross Profit | = | 20% on Sales |
| Sales | = | X |
| Gross Profit | = | 20 | X | x |
| 100 |
| Gross Profit | = | 20x |
| 100 |
| Sales | = | Cost Goods Sold + Gross Profit |
| X | = | 20x | + | Rs.8,00,000 |
| 100 |
| 100x | = | 20x + Rs. 8,00,00,000 |
| 80x | = | Rs. 8,00,00,000 |
| Gross Profit | = | Rs. 8,00,00,000 |
| 80 |
| Operating Cost | = | Cost of Goods Sold + Operating Expenses |
| = | Rs. 8,00,000 + Rs. 50,0000 | |
| = | Rs. 8,50,000 | |
| Operating Profit | = | Net Sales – Cost of Goods Sold – Operating Cost |
| = | Rs. 10,00,000 – Rs. 8,00,000 – Rs. 50,000 | |
| = | Rs. 1,50,000 |
| Operating Ratio | = | Operating Cost | X | 100 |
| Net Sales |
| Operating Ratio | = | Rs. 1,50,000 | X | 100 |
| Rs. 10,00,000 | ||||
| = | 15% |
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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