From the following find out
a. Profit Volume ratio
b. Break even point
c. Sales for 40% P/V Ratio
d. Margin of safety from the sales Rs 3,00,000
e. Net profit from the sales of Rs 3,00,000
f. Required sales for the new profit of Rs 70,000
g. Required sales for the net profit of Rs 70,,000 after
tax, the corporate income tax
being 40%
h. Additional sales required to convert an increase of Rs
3000 p.a. in the sales
manager salary
Sale 2,00,000
Variable Overheads 1,50,000
Profit 50000
Fixed overheads 15000
Net profit 35000
Sl
No
Heads of Account Debit
Rs
Credit
Rs
1 Drawing and Capital 750 15,000
2 Stock as on 01.01.2009 69720
3 Bills Receivable and
bills payable
1000 1180
4 Returns 300 320
5 Purchases and Sales 4500 8300
6 Wages 70
7 Discount 30
8 Salaries 200
9 Canara Bank Shares 3000
10 Insurance 120
11 Building 3000
12 Furniture 700
13 Debtors and Creditors 600 1300
14 Cash in Hand 470
15 Overdraft at bank 900
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Answer Posted / Manmeet Singh
a. Profit Volume Ratio = (Profit / Sales) * 100 = (50000 / 200000) * 100 = 25%nb. Break even point = (Fixed Overheads + Variable Overheads) / Profit Percentage = ((15000 + 150000) / 25) = 720000nc. Sales for 40% P/V Ratio = (Break even point * 40%) = 720000 * 40% = 2880000nd. Margin of Safety = Actual Sales - Break Even Point = 2000000 - 720000 = 1280000ne. Net Profit from the sales of Rs 3,00,000 is already provided as 35,000nf. Required sales for the new profit of Rs 70,000 = (New Profit / (Profit Percentage - Target Profit Percentage)) = (70000 / (25% - 40%)) = 6666667ng. Required sales for the net profit of Rs 70,,000 after tax, the corporate income tax being 40%, is already calculated as 6666667nh. Additional sales required to convert an increase of Rs 3000 p.a. in the sales manager salary = (Total Salaries + Total Variable Overheads) / Sales * Annual Increase = (200 + 150000 + 150000) / 2000000 * 3000 = 9000
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