# 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.

#### 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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