The document provides sales, cost and profit details for two periods of a company. It asks to calculate various ratios and figures like P/V ratio, fixed costs, break even point, profit at different sales levels, sales required for a given profit and margin of safety. All calculations are shown based on the provided information.
The document provides sales, cost and profit details for two periods of a company. It asks to calculate various ratios and figures like P/V ratio, fixed costs, break even point, profit at different sales levels, sales required for a given profit and margin of safety. All calculations are shown based on the provided information.
The document provides sales, cost and profit details for two periods of a company. It asks to calculate various ratios and figures like P/V ratio, fixed costs, break even point, profit at different sales levels, sales required for a given profit and margin of safety. All calculations are shown based on the provided information.
The document provides sales, cost and profit details for two periods of a company. It asks to calculate various ratios and figures like P/V ratio, fixed costs, break even point, profit at different sales levels, sales required for a given profit and margin of safety. All calculations are shown based on the provided information.
Sale of a product amounts to 1000 units per annum at Rs.500 per unit. Fixed overheads are Rs.100000 per annum and variable cost Rs.300 per unit. There is a proposal to reduce the price by 20%. Calculate present and future P/V ratio and Break even point in units? How many units must be sold to maintain profit at present level?
Particulars Present (Rs) Future (Rs)
Selling Price per unit 500 400 Less: Variable Cost per unit 300 300 Contribution per unit 200 100 P/V Ratio ( C/S x 100) 40% 25% Break even point in units (FC/C) 500 units 1000 units Present Profit= (C-FC) 1,00,000 Units to be sold to maintain present profit= FC + P / C = 200000/ 100 = 2000 units 3
An analysis of cost of a company reveals the following particulars : -
Cost Elements Variable Costs (% of sales) Fixed costs
Direct Materials 32.8 Direct Labour 28.4 Factory Overheads 12.6 189900 Distribution Expenses 4.1 58400 Administrative Expenses 1.1 66700 Budgeted sales for next year is Rs.18,50,000. Determine- i) The break even sales volume ii) The profit at the budgeted sales volume iii) The profit, if actual sales – a) Drop by 10% b) Increase by 5% from actual sales. 4
Percentage of Variable cost to sales: i) Break even point in sales value- = FC / P/V Ratio Direct Materials - 32.8% of sales = 189900 + 58400 + 66700 / 21/100 = 315000 x 100/ 21 = 15,00,000 Direct Labour - 28.4% of sales ii) Profit at the budgeted sales of Rs.18,50,000 Factory overheads- 12.6% of sales Contribution = 1850000 x 21% = 3,88,500 Distribution expenses- 4.1% of sales Profit = Contribution – Fixed expenses Administrative expenses- 1.1.% of sales = 3,88,500 – 3,15,000 = 73,500 ----------------- iii) Profit, if actual sales drop by 10% Total Variable Cost 79% of sales = 90% of Budgeted sales = 16.65,000 Contribution= 16,65,000 x 21% = 3,49,650 Percentage of contribution to sales Profit = C- FC = 349650 – 315000= 34650 (C = S – V) = 100 – 79 = 21 iv) Profit, if actual sales increase by 5% P/V Ratio = (C/S) = 21/100 = 105% of 18,50,000 = 19,42,500 = 21% Contribution= 21% of 1942500= 407925 = 407925 – 315000 (FC) = 92925 5
The fixed costs are Rs.150000 and the percentage of variable costs to sales is 66 2/3%. If 100% capacity Sales at normal are Rs.9,00,000, find out the break even point and the percentage sales when it occurs. Also determine profit at 80 % capacity sales.
If sales is 100, then % of contribution to sales is = 100 – 200/3 = 100/3
Contribution 100 1 1 1 1 P/V Ratio = ---------------- = ------- x ------ = ---- or, --- x 100 = 33 --- % Sales 3 100 3 3 3 Fixed expenses 150000 3 Break even point = --------------------- = ----------- = 150000 x -- = Rs.450000 P/V Ratio 1/3 1 100% Capacity sales is Rs.900000, so BEP occurs at 450000 / 900000 x 100 = 50% 6
Profit at 80% Capacity sales :-
100 % capacity sales = Rs.900000
80 So, 80% capacity sales is 900000 x ----- = 720000 100 Variable cost at 80 % sales (66 2/3% of 7,20,000) = 480000 Fixed Costs = 150000 ------------ Total cost 630000 Sales 720000 ----------- Profit at 80% capacity sales 90000 7
Margin of Safety-
It is the difference between the actual sales and the sales at break even point. As it represents the shock absorption capacity of the business, larger the difference better it is. Larger difference means that the business Has a greater capacity to bear loss due to price reduction or fall in sales. Margin of safety can also be termed as The excess production over break even point. It can also be expressed in percentage.
Margin of safety = Present sales – Break even sales
Or Profit Margin of safety = --------------- P/V Ratio 8
A company has fixed expenses of Rs.90000 with sales at Rs.300000 and a profit of Rs.60000 during the first half year. If in the next half year, the company Margin of safety = suffers a loss of Rs.30000, calculate – a) The P/V Ratio, Break even point and Margin of safety for the first half year. Actual sales – b) Expected sales volume for next half year assuming that selling price and break even sales fixed expenses remain unchanged c) The break even point and Margin of safety for the whole year. = 300000 – 180000 a) Contribution = 300000 – 90000 – 60000 = 150000 = 120000 Contribution 150000 a) P/V ratio = ----------------- x 100 = --------- x 100 = 50% Sales 300000 Fixed Cost 90000 Break even point = --------------- = ----------- = 180000 P/V ratio 50% 9
b) Fixed Cost – Loss
Expected sales volume = -------------------------- P/V ratio 90000 – 30000 = -------------------- = 120000 50% c) Fixed cost for the whole year Break even point (For the whole year) = ---------------------------------------- P/V ratio 180000 = ----------- = 360000 50% Margin of safety = Actual sales- Break even sales = 420000 – 360000 = 60000 10
Assuming that cost structure and selling prices remain the same in Periods I and II, find out :-
a) P/V ratio b) Fixed cost c) Break even point for sales d) Profit when sales are Rs.100000 e) Sales required to earn a profit of Rs.20000 f) Margin of safety at a profit of Rs.15000 g) Variable cost in period II
Period Sales (Rs) Profit Rs)
I 120000 9000 II 140000 13000 11
a) Change in profits 13000 – 9000 4000
P/V ratio = ----------------------- x 100 = ---------------------- x 100 = --------- x 100 = 20% Change in sales 140000 – 120000 20000
b) Fixed cost = (Sales x P/V ratio) – Profit = (120000 x 20%) – 9000 = 24000 – 9000 = 15000
c) Fixed cost 15000
Break even point (In rupees) = --------------- = --------- = 75000 P/V ratio 20% d) Profit = (Sales x P/V ratio) – Fixed cost = (100000 x 20%) – 15000 = 20000 -15000 = 5000 e) Fixed cost + Desired profit 15000 + 20000 35000 Sales = ------------------------------------- = --------------------- = ----------= 175000 P/V ratio 20% 20% 12
f) Profit Margin of safety = -------- P/V ratio 15000 = --------- = 75000 20%
g) Variable cost in Period II = (1- P/V ratio) x Sales
Covid-19's Impact On Sindh Education: Paradigm Shift To Neoteric Teaching and Human Resource Mobilization Strategy at Primary Schools Level in Sindh-Pakistan
Covid-19's Impact On Sindh Education: Paradigm Shift To Neoteric Teaching and Human Resource Mobilization Strategy at Primary Schools Level in Sindh-Pakistan
