Solved problems on Break even analysis - 2
Solved problems on Break even analysis - 2
Consider the following data of a company:
Sales = Rs. 40,000;
Fixed cost = Rs. 7500;
Variable cost = Rs. 17,500;
Find the following: (a) Contribution (b) Profit (c) BEP (d) M.S.
Given Data:
Sales = Rs. 40,000
Fixed cost = Rs. 7,500
Total variable cost = Rs.17,500
Formula Used:
Contribution = Sales – Total variable costs
Profit = Contribution - Fixed cost
BEP = Fixed cost / (P/V ratio)
P/V ratio = Contribution / sales
M.S. = Profit / (P/V ratio)
Solution:
(a) Contribution = Sales – Total variable costs
= Rs. 40,000 - Rs. 17,500
= Rs. 22,500
(b) Profit = Contribution - Fixed cost
= Rs. 22,500 - Rs. 7,500
= Rs. 15,000
(c) BEP = Fixed cost / (P/V ratio)
P/V ratio = Contribution / sales
= 22,500 / 40,000
= 0.5625
P/V ratio in percent = 0.5625 x 100 = 56.25%
BEP = 7,500 / 0.5625
= Rs. 13,333.33
(d) M.S. = Profit / (P/V ratio)
= 15,000 / 0.5625
= Rs. 26,666.67
