Question

)
Two business, Y Ltd. and Z Ltd. sell the same type of product in the same type 5+5+5 of market. Their budgeted profit and loss accounts for the coming year are as
follows:
Sales
Less Variable cost Contribution
Less Fixed cost Budgeted N.P.
Y Ltd. (Rs.)
1,50,000 1,20,000 30,000 15,000 15,000
Z Ltd. (Rs.)
1,50,000 1,00,000 50,000 35,000 15,000
(b)
5. (a)
(b)
You are required to (a) Calculate the break even point of each business, (b) Calculate the sales volume at which each of business will earn Rs. 5,000 profit, (c) Calculate at which sales volume of both the firms will earn equal profit.

Answer 1

Explanation:

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Answer 2

Explanation:

a) {P/V Ratio= Cost / Sales}

For Y Ltd= P/V Ratio= 30000/150000 = 1/5 = 20%

For Z Ltd= P/V Ratio= 50000/150000= 1/3= 33 1/3 %

{Break Even Point = Fixed Cost / (P/V Ratio)}

For Y Ltd= 15000/ (1/5) = 15000× 5= 75000

For Z Ltd= 35000/ (1/3) = 35000× 3= 105000

b) {Sales Volume= (Fixed Cost+ Desired Profit) / (P/V Ratio)}

For Y Ltd= (15000+ 5000) / (1/5) = 20000× 5 = 100000

For Z Ltd= (35000+ 5000) / (1/5) = 40000× 5 = 120000