Question

The contribution to sales ratio of company is 20% and profit is Rs. 64500/-. If total sales of company are Rs. 780000/-, the fixed cost is Rs. _________

 A) 156000

 B) 121500

 C) 90000

 D) 91500​

Answer 1

Explanation:

• The contribution to sales ratio of company is 20%

• profit is Rs. 64500/-

• Total sales of company are Rs. 780000/-

• The fixed cost is Rs. = ??

Solution :

Fixed cost = Sales × P/V Ratio - profit

= (7,80,000 × 0.2) - 64,500

= 1,56,000 - 64,500

=  91,500

Fixed cost = Rs 91,500

Therefore, (option) D. Rs 91,500

The fixed cost is Rs 91,500.

Answer 2

Answer:

Option D 91500 is the correct answer.

Explanation:

Contribution to sales ratio = 20% (given)

Profit = Rs. 64500/- (given)

Total sales of company= Rs. 780000/- (given)

Fixed cost =?

Solution:

Fixed cost = (Sales × P/V Ratio - profit).

Fixed cost = ($780,000 - 20 %$‰) - $64500$

Fixed cost = $1,56,000 - 64,500$

Fixed cost = $91500$

Fixed cost = Rs 91,500

Therefore, (option) D Rs 91,500 is the correct answer.

• Fixed costs are costs that remain constant regardless of whether sales or production quantities rise or decrease. This is because they are not directly involved in the manufacture or delivery of a product or service. As a result, fixed expenses are categorized as indirect costs.
• A sale is a transaction in which two or more people trade products or services for money or other assets.
• Profit is defined as the financial advantage obtained when the income generated by a company activity exceeds the expenses, costs, and taxes associated with that activity.
• P/V Ratio = Contribution/ sales. It is used to evaluate the profitability of a business or company. The difference between sales and variable costs is referred to as a contribution. Essentially, the P/V ratio is used to assess the amount of contribution made at the different volumes of sales.

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