a) A company annually manufactures and sells 20000 units of a product, the selling
price of which is Rs.50 and profit earned is Rs 10 per unit.
The analysis of cost of 20000 units is:
Material cost Rs 3,00,000
Labor cost Rs 1,00,000
Overheads Rs 4,00,000(50% variable)
Compute:
Break even sales in units and in Rupees.
Answers
Answer:
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.
3. 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
The break-even point is calculated by dividing the total fixed costs of production by the price of a product per individual unit less the variable costs of production. Fixed costs are those which remain the same regardless of how many units are sold.....n