Question

A company had incurred fixed expenses of ₹4,50,000, with sales of ₹15,00,000 and earned a profit of
₹3,00,000 during the fist half year. In the second half, it suffred a loss of ₹1,50,000.
Calculate :
(i) The profit-volume ratio, break-even point and margin of safety for the first half year.
(ii) Expected sales volume for the second half year assuming that selling price and fixed expenses
remained unchanged during the second half year.
(iii) The break-even point and margin of safety for the whole year.​

Answer 1

Profit 300000

A company had incurred fixed expenses of ₹4,50,000, with sales of ₹15,00,000 and earned a profit of

₹3,00,000 during the fist half year. In the second half, it suffred a loss of ₹1,50,000.

Calculate :

(i) The profit-volume ratio, break-even point and margin of safety for the first half year.

(ii) Expected sales volume for the second half year assuming that selling price and fixed expenses

remained unchanged during the second half year.

(iii) The break-even point and margin of safety for the whole year.​

Explanation:

For first Half Fixed Expense

₹450000

Sales ₹1500000

Profit ₹300000

We will Add: Fixed Cost ₹450000

Contribution ₹750000

1 Profit Volume Ratio 50%

2 Break Even Point Fixed Cost / PV Ratio ₹900000

3 MS Total Sales - Break Even PointS ₹600000

For Second Half Fixed Expense

₹450000

Sales ₹1500000 Loss -₹150000 Profit -₹150000 We Add: Fixed Cost 450000 Contribution ₹300000 1 Profit Volume Ratio 20% 2 Break Even Point Fixed Cost / Profit Volume Ratio