Question

Q No. 6 A Company has a production of 3, 00,000 units. Variable Cost is Rs. 55 per unit and fixed cost is
Rs. 25 per unit. The Company fixes a selling price of Rs 100.
i) What is the Break-Even Point?
ii) What is Profit Volume ratio?
iii) If the Selling price is reduced by 5, how it would affect Break Even Point and P/V ratio?
iv) If the Variable cost is increased by 20%, how it would affect Break Even Point and P/V ratio?​

Answer 1

Answer:

Variable costs per unit: Rs. 400 Sale price per unit: Rs. 600 Desired profits: Rs. 4,00,000 Total fixed costs: Rs. 10,00,000 First we need to calculate the break-even point per unit, so we will divide the Rs.10,00,000 of fixed costs by the Rs. 200 which is the contribution per unit (Rs. 600 – Rs. 200). Break Even Point = Rs. 10,00,000/ Rs. 200 = 5000 units Next, this number of units can be shown in rupees by multiplying the 5,000 units with the selling price of Rs. 600 per unit. We get Break Even Sales at 5000 units x Rs. 600 = Rs. 30,00,000. (Break-even point in rupees)