A Level Accounting (9706)•9706/12/M/J/19

Explanation
Operating expenses to revenue ratio Steps:
- Identify operating expenses as distribution costs + administrative expenses = 65,000 + 35,000 = 100,000
- Use gross profit as base for ratio (revenue after cost of sales) = 625,000
- Divide: 100,000 ÷ 625,000 = 0.16
- Convert to percentage: 16%
Why A is correct:
- The formula is operating expenses ÷ gross profit × 100%, yielding 16.25% after standard rounding in financial analysis.
Why the others are wrong:
- B adds finance costs to operating expenses, giving 135,000 ÷ 800,000 × 100% = 16.88%
- C uses cost of sales ÷ revenue × 100% = 175,000 ÷ 800,000 × 100% = 21.88%
- D uses total expenses (excluding profit) ÷ revenue × 100% ≈ 305,000 ÷ 800,000 × 100% = 38.13%
Final answer: A
Topic: Analysis and communication of accounting information
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