Question

From the following data calculate:

a) P/V ratio

b) Profit when sales are rs.20000.

c) New break – even point if selling price is reduced by 20% fixed break – even sales

Rs.10000.

​

Answer 1

Answer:

From the following data calculate (i) P/V Ratio (ii) Profit

when sales are Rs.20,000 and (iii) the new Break-Even

Point, if the selling price is reduced by 20%

Fixed expenses Rs. 4,000

Break-Even-Pont Rs. 10,000

Explanation:

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Answer 2

a) PV ratio = 40%

b) Profit = 4000 Rs

c) New BEP when price reduced by 20 % = 16,000 Rs

Given, Fixed cost = 4000 Rs

BEP = 10,000 Rs

a) BEP = Fixed cost/ PV ratio

⇒PV ratio = Fixed cost / BEP

= 4000/10000

= 0.4

b) Sales = 20,000 Rs

PV ratio = (Fixed cost + Profit)/ Sales

⇒ 0.4 = ( 4000 + Profit ) / 20000

⇒ 0.4 × 20000 = 4000 + Profit

⇒ 8000 = 4000 + Profit

⇒ Profit = 8000 - 4000

= 4000 Rs

c) Sales = Fixed cost + Variable Cost + Profit

⇒ 20000 = 4000 + Variable cost + 4000

⇒Variable cost = 12000

When selling price is reduced by 20%

New sales = 20000 - ( 20000 × 20% )

= 20000 - 4000

= 16000 Rs

New BEP =( Fixed cost × Sales )/(Sales - Variable cost)

= (4000 × 16000) / (16000 - 12000)

= (4000 × 16000) / 4000

= 16000 Rs