Question

Operating ratio 92%; Operating Expenses rs. 94,000; Revenue from Operation rs. 600,000; Sales Return rs. 40,000. Calculate Cost of Revenue From Operations.(COGS).

Answer 1

Answer:

COGS = 421,200

Explanation:

Revenue = 600,000

Less : Sales returns = 40,000

= 560,000

Operating ratio = 92%

⇒ COGS + Operating expenses = 92%

⇒ COGS + 94,000 = 515,200 (92% of 560,000)

⇒ COGS = 421,200

Answer 2

Explanation:

operating ratio =

$\frac{operating \:cost}{net \: sales} \times 100$

$92 = \frac{operating \: cost}{600000} \times 100$

operating cost =

$\frac{600000 \times 92}{100} = 552000$

operating cost = cost of revenue from operations + operating expenses

552000 = cost of revenue from operations + 94000

cost of revenue from operations = 552000-94000

= 458000