Question

A Company has a P/V Ratio of 40%. It maintains a margin of safety of 20%. It its annual tixed costs amount to Rs 24 lakhs, calculate its: - (a) Break-even sales (b) Margin of safety (c) Total sales (d) Total variable costs (e) Profit.​

Answer 1

Answer:

Explanation:

Break even sales = 24 lac / .40 = 60 lacs

Total sales are 20% = actual sales - BES / BES

that is 72 lacs

Margin of safety = Actual sales - BES

That is 72 lacs - 60 lacs = 12 lacs

Total variable cost at total sales = 72 lacs * 60% that is 43,20,000

Profit

72 lacs - 43,20,000( variable cost) = 28,80,000

28,80,000- 24,00,000( fixed cost) = 4,80,000