If Operating Expenses are $60,000 and Effective Gross Income is $350,000, what is the Operating Expense Ratio?

• A. 17.14%
• B. 20%
• C. 12%
• D. 25%

Answer: (A)

The operating expense ratio is found by dividing operating expenses by the effective gross income. It tells you what portion of income goes to cover operating costs.

Compute 60,000 ÷ 350,000 = 0.171428..., which is about 17.14%. So the operating expense ratio is 17.14%, meaning roughly 17% of the effective gross income is consumed by operating expenses. The other percentage options (20%, 12%, 25%) would reflect different ratios that don’t match this calculation.