What is the formula for Operating Expense/Sales?

• A. Total Operating Expense / Total Sales
• B. Total Sales / Total Operating Expense
• C. Operating Expense / Net Sales
• D. Cost of Goods Sold / Total Sales

Answer: (A)

This measures how much of each dollar of sales is consumed by operating expenses. You get this by dividing operating expenses by sales. The option with Total Operating Expense divided by Total Sales directly matches that definition, since you’re putting the full operating costs in the numerator and the total sales in the denominator. In practice, many sources use net sales in place of total sales, so Operating Expense divided by Net Sales is functionally the same ratio, as long as the same sales figure is used consistently.

The other forms don’t describe the same idea: inverting the ratio (sales over operating expenses) would not show the expense burden per sales dollar; using Cost of Goods Sold puts a different cost component into the numerator; and using Net Sales could be just a terminological variant, but the given answer aligns with the stated formula cleanly. For example, if operating expenses are 150,000 and sales are 1,000,000, the ratio is 0.15 (15%).