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4.14 Management Accounting (Section B)—ISC XII

Solution:
Net Profit Ratio = Net Profit ¥ 100
Revenue from Operations

` 2,30,000
= ¥ 100 = 18.40%.
` 12,50,000
Illustration 11.
Following is the Statement of Profit and Loss of a firm for the year ended 31st March,
2019, calculate Operating Ratio:

STATEMENT OF PROFIT AND LOSS for the year ended 31st March, 2019
Particulars Note No. `
I. Income
Revenue from Operations (Net Sales) 4,00,000
II. Expenses
Purchases of Stock-in-Trade 2,25,000
Change in Inventories of Stock-in-Trade (15,000)
Employees Benefit Expenses 1 6,000
Other Expenses 2 34,000
Total 2,50,000
III. Net Profit (I – II) 1,50,000

Notes to Accounts
1. Employees Benefit Expenses `
Wages 6,000
2. Other Expenses
Administration Expenses 10,000
Selling and Distribution Expenses 14,000
Loss on Sale of Plant 10,000
34,000
Solution:

Operating Ratio
Cost of Revenue from Operations (Cost of Sales) (WN 1) + Operating Expenses (WN 2)
= ¥ 100
Revenue from Operations

` 2,16,000 + 24,000` ` 2,40,000
= × 100 = ¥ 100 = 60%.
` 4,00,000 ` 4,00,000

Working Notes:
1. Cost of Revenue from Operations (Cost of Sales)
= Purchases of Stock-in-Trade + Change in Inventories of Stock-in-Trade
+ Wages (Employees Benefit Expenses)
= ` 2,25,000 – ` 15,000* + ` 6,000 = ` 2,16,000.
*Changes in Inventories of Stock-in-Trade is a negative amount. Hence, it is deducted.