Question

You are required to calculate profit from the following data :
Sales Rs. 80,000
Marginal Cost Rs. 60,000
Break-Even sales Rs. 60,000

Answer 1

Answer:

Explanation:

(a)Profit volume ratio  = 50%

Break – Even Point  = 30000

Margin of Safety =  30000

(b) Profit volume ratio  = 54.54%

Break – Even Point  = 27502.75

Margin of Safety =  38497.25

(c) Profit volume ratio  = 44.44%

Break – Even Point  = 33753.37

Margin of Safety =  20246.63

= 30,000 + 50,000 = 80,000  

Contribution desired = Fixed cost + Desired Profit

b. Calculation of contribution by producing 40,000 units.

Contribution per unit = Selling price – Marginal cost

= 3.00 – 1.50

= 1.50

c. Contribution for producing 40,000 units.

= 1.50 x 40,000 units

= Rs.60, 000

d. Additional units to be produced and sold at Rs. 2.00 per unit after 40,000 units.

=Rs.80, 000 –Rs. 60, 000

=Rs.20, 000

e. Units to be produced for contribution of Rs. 20, 000 after change in price.

Contribution per unit = Rs. 2.00 – Rs. 1.50= Rs. 0.50

f. Additional units to be produced for contribution of Rs. 20, 000.

= (20, 000 x 100)/50 = 40, 000 units.

Total units to be produced to earn planned profit = 40, 000 + 40, 000 = 80, 000 units