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From the following data calculate (i) P/V Ratio (ii) Profit
when sales are Rs.20,000 and (iii) the new Break-Even
Point, if the selling price is reduced by 20%
Fixed expenses Rs. 4,000

Break-Even-Pont Rs. 10,000

Question Posted / arvind rana (behdala) una,hp

Answer Posted / arvind rana (behdala) una,hp

GIVEN==> sales=20000, FC=4000, BEP=10000

ANSWER==>(1)PVR=40% (2)PROFIT=4000 (3)NEW BEP=8000

BEP=FC/PV RATIO
:. PV RATIO= FC/BEP
PV RATIO= 4000/10000 *100
(1)PVR=40% ANS

varification of ANS(1):-
PVR=SALES-VARIABLE COST/SALES*100
=20000-12000/20000*100
=8000/20000*100
=40%
OR
PVR=FC+PROFIT/SALES*100
=4000+4000/20000*100
=8000/20000*100
=40%
OR
PVR=CONTRIBUTION/SALES*100
=8000/20000*100=40%
+----------------------------------------------------------+
DESIRED PROFIT= (SALES*PVR)-FC
DP= (20000*40%)-4000
DP=8000-4000=4000
(2) DESIRED PROFIT=4000

VARIFICATION OF ANS(2):-
VC=(1-PVR)SALES =(1-40%)SALES=60%(20000)=12000

SALES=FC+VC+P
20000=4000+12000+P
P=20000-16000=4000
+----------------------------------------------------------+

NEW SELLING PRICE=20000-20%=16000
NEW BEP= FC/N PVR

N PVR=FC+PROFIT/NEW SELLING PRICE*100
=4000+4000/16000*100
=8000/16000*100
=50%
NEW BEP=4000/50%
=8000
(3) NEW BREAK EVEN POINT=8000 ANS

VARIFICATION OF ANS(3):-

BREAK EVEN POINT IS A SITUATION WHERE TOTAL COST=TOTAL
SALES AND CONTRIBUTION=FIXED COST
REDUCTION IN SALES ONLY EFFECTS ON VARIABLE COST.
SO:- %AGE CHANGE IN SALES(-20%) = CHANGE IN BEP
O
LD BEP=10000 (GIVEN)
NEW BEP=10000-(20%)10000-2000=8000.
+---------------------------------------------------------+

Is This Answer Correct ?    12 Yes 16 No



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