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The Following Information is Obtained from Abc Ltd. and Xyz Ltd. in a Year. - Cost Accounting(Financial Accounting and Auditing 10)

The following information is obtained from ABC Ltd. and XYZ Ltd. in a year.

Particulars ABC Ltd.(Rs.) XYZ Ltd.(RS.)
Sales 3,00,000 3,00,000
(-) Variable Cost 2,00,000 2,25,000
(- ) Fixed Cost 50,000 25,000
Estimated Profit 50,000 50,000

You are required to calculate for each company.
(i) Profit Volume Ratio and Break Even Point.
(ii) Margin of Safety.

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Solution

ABC Ltd.   XYZ Ltd.  
Particulars (Rs.) Particulars (Rs.)
Sales 3,00,000 Sales 3,00,000
(-) Variable Cost 2,00,000 (-) Variable Cost 2,25,000
Contribution 1,00,000 Contribution 75,000
(-) Fixed Cost 50,000 Fixed Cost 25,000
Profit 50,000 Profit 50,000

(i) P/V Ratio `="C"/"S"xx100`

`=(1,00,000) / (3,00,000)xx100`

= 33.33%

BEP `="FC"/"P/V Ratio"`

`=(50,000) / (33.33%)`

= Rs. 1,50,015 

(ii) Margin of Safety
= Actual Sales (-) BEP Sales
= Rs. 3,00,000 (-) Rs. 1,50,015

= Rs. 1,49,985

 

P/V Ratio `-"C"/"S"xx100`

`=(75,000)/(3,00,000)xx100`

= 25%

BEP = `"FC"/"P/V Ratio"`

`=(25,000)/(25%)`

= Rs. 1,00,000

(ii) Margin of Safety

= Actual Sales (-) BEP Sales

= Rs. 3,00,000 (-) Rs. 1,00,000

= Rs. 2,00,000

 

 

Concept: Break-even Point - Cost Volume Profit Analysis
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