141 marginal cost statement sales 200000 x 15 3000000

Info icon This preview shows pages 148–152. Sign up to view the full content.

141 Marginal cost statement Sales (2,00,000 x 15) 30,00,000 Less: variable cost( 2,00,000 x 10) 20,00,000 Contribution 10,00,000 Less: fixed cost 6,00,000 Profit 4,00,000 Illustration 8 Fixed overhead Rs.2,40,000 Variable overhead Rs.4,00,000 Direct wages Rs.3,00,000 Direct materials Rs.8,00,000 Sales Rs.20,00,000 Calculate the break even point and P/V ratio Solution Statement showing contribution Rs. Rs. Sales 20,00,000 Less variable cost Direct materials 8,00,000 Direct wages 3,00,000 Variable overhead 4,00,000 15,00,000 Contribution 5,00,000 P/V ratio = (contribution/ sales) x 100 = (5,00,000 / 10,00,000) x 100 = 50% Break even point = fixed cost/ P/V ratio = 2,40,000 / 50% = Rs.4,80,000 Illustration 9 Marginal cost Rs.4800 Selling price Rs.6000 Calculate P/V ratio
Image of page 148

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

142 Solution P/V ratio = contribution / sales x 100 = (Rs.6000 Rs.4800)x 100 / Rs.3000 =(Rs.1200 / Rs.3000) x 100 = 40 % Illustration 10 The sales turnover and profits during two periods are as under: Period I : sales Rs.20 lakhs; profit Rs.2 lakhs Period II : sales Rs.30 lakhs; profit Rs.4 lakhs Calculate P/V ratio Solution: P/V ratio = change in profit /change in sales x 100 = (Rs.4,00,000 Rs.2,00,000 x 100)/ (Rs.30,00,000 -Rs.20,00,000) = 2,00,000/10,00,000 x 100 = 20% Illustration 11 The following date are obtained from the records of a company First year second year Rs. Rs. Sales 80,000 100,000 Profit 10,000 14,000 Calculate the break even point Solution B.E.P (Sales ) = Fixed cost / P/V ratio P/V ratio = change in profit/ change in sales x 100 = 4,000 /20,000 x 100 = 20% Fixed cost = contribution profit or sales x P/V ratio Fixed cost = 80,000 x 20 /100 Rs.10,000 = 16,000 10,000 =6,000 B.E.P (sales ) = 6,000 x 100 / 20 = Rs.30,000 Illustration 12 Company earned a profit of Rs.60,000 during the year 2015-16. If the marginal cost and selling price of a product are Rs.8 and Rs.10 per unit respectively. Find out the amount of margin of safety
Image of page 149
143 Solution Contribution per unit = selling price marginal cost = Rs.10 Rs.8 = Rs.2 P/V ratio = contribution / sales x 100 = 2/10 x 100 = 20% Margin of safety = Profit / P/V ratio = Rs.60,000 / 20% = Rs.3,00,000 Illustration 13 From the following details find out a. profit volume ratio, b. B.E.P, c. margin of safety Rs. Sales 1,00,000 Total costs 80,000 Fixed costs 20,000 Net profit 20,000 Solution 1. P/V ratio = ( sales variable expenses) / sales x100 = (1,00,000 60,000 )/1,00,000 x 100 = 40 2. B.E.P = Fixed cost / P/V ratio = 20,000 / 40% or 20,000 x 100 / 40 = Rs.50,000 3. Margin of safety = profit / P/V ratio = 20,000 / 40% = 20,000 x 100 / 40 = Rs.50,000 Or Margin of safety = actual sales sales at B.E.P = 1,00,000 50,000 = Rs.50,000
Image of page 150

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

144 Illustration 14 The following information was obtained from a company in a certain year Rs. Sales 1,00,000 Variable costs 60,000 Fixed costs 30,000 Find the P/V ratio, break even point and margin of safety. Solution P/V ratio = (S V) / S X 100 = (1,00,000 60,000) / 1,00,000 X 100 = 40% Break even point= F / P/V ratio = 30,000 / 40% = Rs.75,000 Margin safety = Profit / P/V ratio = 10,000 / 40% = Rs.25,000 Or = sales break even sales = Rs.1,00,000 Rs.75,000 = Rs.25,000 10.4 REVISION POINT The term Contribution refers to the difference between Sales and Marginal Cost of Sales. P/v ratio helps in the determination of break even point and margin of safety Break even point is a point at which there is no profit or no loss of a particular sales volume.
Image of page 151
Image of page 152
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern