1 Rainbow Ltd. sold goods for Rs. 30,00,000 in a year. In that year, the variable costs were Rs. 6,00,000 and fixed costs were Rs. 8,00,000. Find out:
1 Rainbow Ltd. sold goods for Rs. 30,00,000 in a year. In that year, the variable costs were Rs. 6,00,000 and fixed costs were Rs. 8,00,000. Find out:
- i) MCSR or P/V Ratio
- ii) Break-even sales
iii) Break-even sales, if the selling price was reduced by 10 % and fixed costs were increased by Rs. 1,00,000.
Answer: i) It expresses the relationship between contribution and sales. It is also termed as Marginal Contribution Sales Ratio (MCSR).
Profit Volume Ratio = Contribution *100
Sales
= Rs.24,00,000/ Rs.30,00,000 * 100
= 80%
Working note: 1
Contribution = Sales- Variable costs
= Rs.30,00,000- Rs.6,00,000
= Rs.24,00,000
- ii) Break even sales = Fixed costs / MCSR
= Rs.8,00,000/ 80%
= Rs.10,00,000
iii) Here, neither selling price is given in the question nor the units produced so in absence of required information we cannot calculate the old selling price and if old selling price is not there, we cannot find new selling price out of it.
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