#### Question

The Sales Turnover and Total Cost of M/s. ABC Ltd. are as under :

Year |
Sales(Rs.) |
Total Cost (Rs.) |

2017 | 1,50,000 | 1,20,000 |

2018 | 1,80,000 | 1,42,500 |

**You are required to calculate:**(a) Profit Volume Ratio, (b) Fixed Cost, (c) Break-even Point, (d) Sales to earn a Profit of Rs. 45,000.

#### Solution

Year |
Sales(Rs.) |
Total Cost (Rs.) |
Profit (Rs.) |

2017 | 1,50,000 | 1,20,000 | 30,000 |

2018 | 1,80,000 | 1,42,500 | 37,500 |

**(a) P/V Ratio **`="Change in Profits"/"Change in Sales"xx100`

`=(7,500 (37,500 - 30,000))/(30,090 (1,80,000 - 1,50,000))xx100`

**= 25%**

**(b) Fixed Cost P/V Ratio is 25%.**

∴ Contribution (C) is also 25% of Sales.

∴ Contribution `=25/100xx1,50,000`

**= Rs. 37,500**

Now, C- PC = Profit

∴ 37,500 - FC = 30,000**∴** **FC = Rs. 7,500 (For Year 2017)**

**For Year 2018, also,**

C- PC = Profit

∴ 45,000 - FC = 37,500**∴** **FC = Rs. 7,500 (For Year 2018)**

**(c) Break-even Point** `="FC"/"P/V Ratio"`

`=(7,500)/(25%)`

**= Rs. 30,000**

**(d) Sales to earn a Profit of 45,000**

S `="FC (+)Desired Profit"/"P/V Ratio"`

S `=(7,500 (+) 45,000)/(25%)`

S `=(52,500)/(25%)`

**S = Rs. 2,10,000**