Question

P/V Ratio is 25% and Margin of Safety is Rs; 3,00,000, the amount of profit is__________. 1 point A. Rs. 1,00,000. B. Rs. 80,000. C. Rs. 75,000. D. . Rs. 60,000.

Answer 1

Explanation:

Given :

• P/V Ratio is 25%
• Margin of Safety is Rs. 3,00,000

To find :

• The amount of profit

Solution :

P/V Ratio is 25%

P/V Ratio = (Contribution/Sales) × 100 = 25%

OR

P/V Ratio = (Sales - Variable Cost/Sales) × 100 = 25%

Contribution = Sales - Variable Cost

★ Margin of safety = Profit/ Profit Volume Ratio

⇒ 3,00,000 = Profit / 25%

★ Profit = Margin of safety × Profit Volume Ratio

⇒ 3,00,000 × 25%

⇒ 3,00,000 × (25/100)

⇒ 3,00,000 × 0.25

⇒ 75,000

Profit = Rs. 75,000

Therefore, (Option C.- Rs. 75,000)

The amount of profit is Rs. 75,000.

Answer 2

Explanation:

P/V Ratio is 25%

Margin of Safety is Rs; 3,00,000,

the amount of profit is = ??

Margin of Safety = profit/P/V Ratio

= 3,00,000 = profit/25%

Profit = 3,00,000× 25%

= 75,000

also,

Profit = Margin of Safety × P/V Ratio%

Profit = Rs.75,000

Hence, Profit = Rs.75,000 (option c)