The following data relate to Product QP: Selling price Rs. 50 per unit Variable cost Rs. 40 per unit Fixed cost Rs. 1,00,000 (a) Calculate the number of units to be produced and sold to break even (b) Calculate the level of activity that is required to generate a profit of Rs. 80,000 (c) Calculate the margin of safety when sales is 13000 units (d) Calculate C/S ratio
Answers
Given : Selling price Rs. 50 per unit
Variable cost Rs. 40 per unit
Fixed cost Rs. 1,00,000
To Find : (a) Calculate the number of units to be produced and sold to break even
(b) Calculate the level of activity that is required to generate a profit of Rs. 80,000
Solution:
Let say x unit solid
Revenue = 50x
Variable cost = 40x
Fixed Cost = 100000
Total Cost = 40x + 100000
Break even
Revenue = Total Cost
=> 50x = 40x + 100000
=> 10x = 100000
=> x = 10000
Hence 10000 units
profit of Rs. 80,000
=> 50x - (40x + 100000) = 80000
=> 10x = 180000
=> x = 18000
18000 units for a profit of 80000
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