(Solved by Humans)-Problem 6 A multi-product company furnishes the following data relating to the year 2002: 1st Half..

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Problem 6 A multi-product company furnishes the following data relating to the year 2002: 1st Half of the Year 2nd Half of the Year (Rs.) (Rs.) Sales 45,000 50,000 Total Cost 40,000 43,000 Assuming that there is no change in the prices and variable cost and the fixed expenses are incurred equally in the two half years, calculate for the year 2002 the following: (i) The P/V ratio (ii) The fixed expenses (iii) The breakeven sales (iv) The percentage of margin of safety to total sales Solution Period Sales Total Cost Profit 2nd Half of the Year 50,000 43,000 7000 1st Half of the Year 45,000 40,000 5000 Change 5000 3000 2000 (i) P/V Ratio = Change in Profit x 100, i.e. 2000 x 100 = 40% Change in Sales 5000 (ii) Fixed Expenses Sales for the Year = 45,000 + 50,000 = 95,000 Contribution for the Year = Rs. 95,000 x 40 = 38,000 100 Less: Profit for the Year Rs. 5000 + Rs. 7000 = 12,000 Fixed Expenses for the Year = 26,000 (iii) Breakeven Sales = Fixed Cost, i.e. 26,000 x 100 = Rs. 65,000 P/V ratio 40 (iv) Margin of Safety = Total Sales – Breakeven Sales = 95,000 – 65,000 = Rs. 30,000 Percentage of Margin of Safety to Total Sales = 30,000 x 100 = 31.58% 95,000