Question

2019 2020
sales in lakhs 150 200
profit 30 50
calculate
a)the pv ratio and total fixed expenses
b)the break even level of sales
c)sales required to earn profit if rs.90lakh​

Answer 1

Answer:

2019 2020

sales in lakhs 150 200

profit 30 50

calculate

a)the pv ratio and total fixed expenses

b)the break even level of sales

c)sales required to earn profit if rs.90lakh​

Explanation:

 Pepsi Company produces a single article. Following cost data is given about its

product:‐  

Selling price per unit       Rs.40

Marginal cost per unit       Rs.24

Fixed cost per annum       Rs. 16000

Calculate:

     (a)P/V ratio (b) break even sales (c) sales to earn a profit of Rs. 2,000 (d) Profit

at sales of Rs. 60,000 (e) New break even sales, if price is reduced by 10%.

Solution:

  We know that (S‐v) /S= F + P   OR   s x P/V Ratio = Contribution

So,   (A) P/V Ratio = Contribution/sales x 100

             = (40‐24)/40 x 100 = 16/40 x 100 OR 40%

(B) Break even sales  

S x P/V Ratio = Fixed Cost

(At break even sales, contribution is equal to fixed cost)

Putting this values: s x 40/100 = 16,000

S = 16,000 x 100 / 40 = 40,000 OR 1000 units

(C) The sales to earn a profit of Rs. 2,000

S x P/V Ratio = F + P

Putting this values: s x 40/100 = 16000 + 2000

S = 18,000 x 100/40  

S = Rs. 45,000OR 1125 units

(D)Profit at sales of 60,000

S x P/V Ratio = F + P

Putting this values: Rs. 60,000 x 40/100 = 16000 + P

24,000 = 16000 + P

24,000 – 16,000 = P

8,000

(E) New break even sales, if sale price is reduced by10%

New sales price = 40‐10%  = 40‐4 = 36

Marginal cost = Rs. 24

Contribution    = Rs. 12

P/V Ratio = Contribution/Sales

   = 12/36 x100    OR 33.33%

Now, s x P/V Ratio = F       (at B.E.P. contribution is equal to fixed cost)

S x 100/300 = Rs.16000    

S = 16000 x 300/100    

S= Rs.48,000.

2.   From the following information's find out:

a. P/V Ratio

b. Sales &

c. Margin of Safety

Fixed Cost = Rs.40, 000

Profit = Rs. 20,000  

B.E.P. = Rs. 80,000

Solution:

a. P/V Ratio.  

We know that S – V = F + P OR S(S – V)/S = F + P

B.E.S. x P/V Ratio = F (Value of P is zero at BE Sales) OR P/V Ratio = F/BES

Putting the value,

P/V Ratio = 40,000/80,000 = 50/100 OR 50%

b. Sales.

We know that Sales x P/V Ratio = F+ P OR Sales x P/V Ratio = Contribution

OR Sales = Contribution/P/V Ratio

So, = (40,000 + 20,000)/50/100

= (60,000 x 100)/50

=Rs.1, 20,000

c. Margin of Safety.

Margin of Safety = Sales – B.E.P Sales

So, MOS = 1, 20,000 – 80,000

MOS = Rs.40, 000