Question

1 Variabile Cost at 60% level is 60,000 what will be variable cost under 70% under Flexible Budget ​

Answer 1

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1. Ratio of variable cost to Sale-60/100 (given)
2. Ratio of Contribution to /sale(P/V Ratio)= (100–60)/ 100 or 40%
3. Fixed Cost=40000 (given)
4. BEP=Fixed Cost/ PV Ratio= 40000/40%=Rs.100000/-

Part II :-

Assumption: cost becomes 50% of original SP, and then SP is increased by 20%

i.e., Cost becomes Rs. 50 and SP becomes Rs. 120

Contribution=120–50=Rs. 70

New PV Ration= Rs 70/120=58.33

NEW BEP=40000/58.33=68575.34

Assumption: cost becomes 50% of Revised SP

PV Ratio =50%

New BEP=40000/.5=Rs. 80000/-

It is very important to bring out what assumptions have been made while solving the problem.

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