Answer to Question #315136 in Financial Math for willy

Question

   You are given the following data for the year 2016 of XYZ Co. Limited

Variable cost              600,000

Fixed cost                  300000

Net profit                   100,000

1000,000

Required, Find out:

a)    Break-even point

b)    P/V ratio

c)    Margin of safety

d) Draw a break even chart showing contribution 

Answer 1

Contribution: Fixed cost + Profit

= 300000+100000

=400000

Sales: Contribution + Variable cost

=400000+600000

=1000000

Contribution margin ratio (CMR):

=$\frac{contribution}{Sales}×100$

=$\frac{400000}{1000000}×100$

=40%

a) BEP=$\frac{FC}{CMR}$

$=\frac{300000}{40\%}=750000$

b)P/V ratio= CMR= 40%

c) Margin of Safety= Actual sales - BEP sales

=1000000-750000

=250000