Question

you are analysing a case wearing the margin of safety is rupees 64000 the units required to break even are 1600 and the total cost is rupees 41600 the sales achieved over and above the break even is 6400 units. The P/V ratio is?​

Answer 1

Answer:

48%

Explanation:

Assume the total Variable cost = Rs.41600 at actual sales

Actual sales (in Units ) = 6400 + (BEP sales) 1600 = 8000

so Margin of safety = Actual sales - Break even sales

Let the price of unit  = x ; Margin of safety = 64000 (Given)

so 8000 * x  -  1600 * x = 64000

6400x = 64000 and x = 64000/6400 = 10 (Price per unit)

so Actual sales = 8000 * 10 = 80000

Now 41600 is total variable cost

Contribution = Sales - Variable cost

= 80000 - 41600 = 38400

P/V Ratio = contribution/Sales * 100

= 38400/80000 * 100

= 48%