Cost of Revenue from Operations is Rs. 1,50,000. Operating expenses are Rs. 60,000. Revenue from Operations is Rs. 2,50,000. Calculate Operating Ratio.
Operating Cost = Cost of Revenue from Operations + Operating Expenses = Rs. 1,50,000 + Rs. 60,000 = Rs. 2,10,000
Operating Ratio = (Operating Cost / Net Revenue from Operations) × 100 = (Rs. 2,10,000 / Rs. 2,50,000) × 100 = 84%
Explanation
The Operating Ratio is calculated to analyze the cost of operation in relation to revenue from operations. Based on the provided context, specifically the solution for Illustration 20, Operating Cost is the sum of the Cost of Revenue from Operations and Operating Expenses (which includes Selling and Administrative expenses). The Operating Ratio is then calculated by dividing the Operating Cost by Net Revenue from Operations and multiplying by 100.
Solution Steps
Step 1: Calculate Operating Cost by adding Cost of Revenue from Operations (Rs. 1,50,000) and Operating Expenses (Rs. 60,000), which equals Rs. 2,10,000.
Step 2: Calculate Operating Ratio using the formula (Operating Cost / Net Revenue from Operations) × 100, resulting in (2,10,000 / 2,50,000) × 100 = 84%.