Question

From the following information calculate : PV ratio , Break Even point , margin of safety ... Total sales 3,60,000 selling price per unit 100 variable cost per unit 50 fixed cost 1,00,000​

Answer 1

Answer:

P/V ratio = 0.5

Break Even Point = 3,600 Units

margin of safety = 1,600 Units

Explanation:

P/V ratio = Contribution/Sales

Contribution = Sales - Variable Cost

Units sold = Rs. 3,60,000/Rs. 100 = 3,600 Units.

Variable Cost = 3,600 x Rs. 50 = Rs. 1,80,000

Contribution = Rs.(3,60,000 - 1,80,000) = Rs. 1,80,000

P/V Ratio = 1,80,000/3,60,000 = 0.5

Break Even Point (in Units) = Fixed Cost/Contribution per unit

Contribution Per Unit = 1,80,000/3,600=Rs. 50

=1,00,000/50

=2,000 Units

Break Even Point (in Rs.) = 2,000 x 100 = Rs. 2,00,000

Margin of Safety (in Units) = Current Sales Units - Break Even Sales Units

=3,600 - 2,000 = 1,600 Units.

Margin of Safety (in Rs.) = Current Sales - Break Even Sales

=Rs. (3,60,000 - 2,00,000) = Rs. 1,60,000

Margin of Safety Ratio = (Current Sales Units - Break Even Sales Units)/Current sales Units

=1,600/3,600 = 0.44.

Answer 2

Answer:

P/V Ratio= 0.5

Break Even Point= 3,600

Margin of safety= 1.600

Explanation:

• To calculate P/V Ratio we use the formula = Contribution/ Sales

Contribution= Sales- Variable Cost (VC)

Units sold=3,600/ rs. 100= 3,600

VC= 3,600 x rs.50 = rs. 1,80,000

Contribution= rs. (3,60,000 - 1,80,000) = rs. 1,80,000

Therefore P/V ratio = 1.80,000- 3,60,000 = 0.5

• To calculate Break Even Point we use the formula = Fixed Cost/ Contribution per unit

Contribution per unit cost= 1,80,000-3,600=rs.50

1,00,000/50= 2,000 units

Therefore Break Even Point= 2,000 x 100= rs. 2,00,000

• To calculate Margin of Safety we use the formula=

          Current Sales Unit - Break Even Sales

         = rs. ( 3,60,000-2,00,000)= rs.1,60,000

Margin of Safety =

(Current Sales Unit - Break Even Sales unit) / Current Sales Unit

= 1,600 / 3,600 = 0.44