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