From the above information, calculate the operating ratio.

Solution

Operating ratio = (Cost of goods sold + operating expenses) / sales *100                         Cost of goods sold (COGS) = opening stock + purchases + carriage and freight + wages – closing stock = 76,250 + 315,250 + 2000 + 5000 – 98,500 = 3,00,000   Operating expenses = admin expenses + selling and dist. Expenses                                     = 1,01,000 + 12,000                                     = 1,13,000   Operating ratio = (3,00,000 + 1,13,000) / 5,00,000 *100                         = 82.6%