BEP ANALYSIS

1. From the following particulars, calculate:

(i) Break-even point in terms of sales value and in units.
(ii) Number of units that must be sold to earn a profit of Rs. 90,000.

2. From the following data, you are required to calculate:

(a) P/V ratio
(b) Break-even sales with the help of P/V ratio.
(c) Sales required to earn a profit of Rs. 4,50,000
Fixed Expenses = Rs. 90,000
Variable Cost per unit:
Direct Material = Rs. 5
Direct Labour = Rs. 2
Direct Overheads = 100% of Direct Labour
Selling Price per unit = Rs. 12.

3. From the following data, you are required to calculate break-even point and net sales value at this point:

If sales are 10% and 25% above the break even volume, determine the net profits

4. From the following particulars, find out the break-even-point:

What should be the selling price per unit, if the break-even point should be brought down to 6,000 units?

5. The fixed costs amount to Rs. 50,000 and the percentage of variable costs to sales is given to be 66 ⅔%.
If 100% capacity sales are Rs. 3,00,000, find out the break-even point and the percentage sales when it
occurred. Determine profit at 80% capacity:

6. Calculate:
(i) The amount of fixed expenses.
(ii) The number of units to break-even.
(iii) The number of units to earn a profit of Rs. 40,000.
The selling price per unit can be assumed at Rs. 100.
The company sold in two successive periods 7,000 units and 9,000 units and has incurred a loss of Rs. 10,000
and earned Rs. 10,000 as profit respectively.

7. A company is making a loss of Rs. 40,000 and relevant information is as follows:

Sales Rs. 1,20,000; Variable Costs Rs. 60,000; Fixed costs Rs. 1,00,000.
Loss can be made good either by increasing the sales price or by increasing sales volume. What are Break
even sales if
(a) Present sales level is maintained and the selling price is increased.
(b) If present selling price is maintained and the sales volume is increased. What would be sales if a profit of
Rs. 1,00,000 is required ?

8. A company is making a loss of Rs. 40,000 and relevant information is as follows:

Sales Rs. 1,20,000; Variable Costs Rs. 60,000; Fixed costs Rs. 1,00,000.
Loss can be made good either by increasing the sales price or by increasing sales volume. What are Break
even sales if
(a) Present sales level is maintained and the selling price is increased.
(b) If present selling price is maintained and the sales volume is increased. What would be sales if a profit of
Rs. 1,00,000 is required ?

9. Arnav Ltd. manufacture and sales its product R-9. The following figures have been collected from cost
records of last year for the product R-9:
Elements of Cost Variable Cost portion Fixed Cost
Direct Material 30% of Cost of Goods Sold --
Direct Labour 15% of Cost of Goods Sold --
Factory Overhead 10% of Cost of Goods Sold ₹ 2,30,000
General & Administration Overhead 2% of Cost of Goods Sold ₹ 71,000
Selling & Distribution Overhead 4% of Cost of Sales ₹ 68,000
Last Year 5,000 units were sold at ₹185 per unit. From the given data find the followings:
(a) Break-even Sales (in rupees)
(b) Profit earned during last year
(c) Margin of safety (in %)
(d) Profit if the sales were 10% less than the actual sales.

10. Following information are available for the year 2013 and 2014 of PIX Limited:
Year 2013 2014
Sales ₹ 32, 00,000 ₹ 57, 00,000
Profit/ (Loss) (₹ 3,00,000) ₹ 7, 00,000

Calculate – (a) P/V ratio, (b) Total fixed cost, and (c) Sales required to earn a Profit of
₹ 12,00,000.

11. The ratio of variable cost to sales is 70%. The break-even point occurs at 60% of the capacity sales.
Find the capacity sales when fixed costs are ₹ 90,000. Also compute profit at 75% of the capacity sales.

12. Maximum Production capacity of KM (P) Ltd. is 28000 units per month. Output at different levels
along with cost data is furnished below:
Particulars of Costs Activity
Level
16,000 units 18,000 units 20,000
units
Direct Material ₹ 12,80,000 ₹ 14,40,000 ₹ 16,00,000
Direct labour ₹ 17,60,000 ₹ 19,80,000 ₹ 22,00,000
Total factory overheads ₹ 22,00,000 ₹ 23,70,000 ₹ 25,40,000
You are required to work out the selling price per unit a an activity level of 24,000 units by considering
profit at the rate of 25% on sales.

13. XYZ Ltd. has a production capacity of 2,00,000 units per year. Normal capacity utilisation is as 90%.
Standard variable production costs are ₹11 per unit. The fixed costs are ₹3,60,000 per year. Variable
selling costs are ₹3 per unit and fixed selling costs are ₹2,70,000 per year. The unit selling price is ₹20.

14. In the year just ended on 30th June, 2014, the production was 1,60,000 units and sales were 1,50,000
units. The closing inventory on 30th June was 20,000 units. The actual variable production costs for the
year were ₹ 35,000 higher than the standard.
1. Calculate the profit for the year
2. by absorption costing method and
3. by marginal costing method.
4. Explain the difference in the profits.

15. A company sells its product at ₹ 15 per unit. In a period, if it produces and sells 8,000 units, it incurs a
loss of ₹ 5 per unit. If the volume is raised to 20,000 units, it earns a profit of ₹ 4 per unit. Calculate break-
even point both in terms of rupees as well as in units.
16. A company produces single product which sells for ₹ 20 per unit. Variable cost is ₹ 15 per unit and
Fixed overhead for the year is ₹ 6,30,000.
Required:
(a) Calculate sales value needed to earn a profit of 10% on sales.
(b) Calculate sales price per unit to bring BEP down to 1,20,000 units.
(c) Calculate margin of safety sales if profit is ₹ 60,000.

17. If margin of safety is ₹ 2,40,000 (40% of sales) and P/V ratio is 30% of AB Ltd, calculate its (1) Break
even sales, and (2) Amount of profit on sales of ₹9,00,000.

18. X Ltd. has earned a contribution of ₹2,00,000 and net profit of ₹1,50,000 of sales of ₹ 8,00,000. What is
its margin of safety?

19 A B and C are three similar plants under the same management who want them to be merged for
better operation. The details are as under:
Particulars Plant A at Plant B at 70% Plant C at 50%
100% (₹ in (₹ in Lakhs) (₹ in Lakhs)
Lakhs)
Turnover 300 280 150
Variable Cost 200 210 75
Fixed Cost 70 50 62
Required:-
a) Compute the capacity of the merged plant for break-even
b) Compute the profit of the merged plant at 75% capacity
c) Compute the capacity utilisation of the merged plant to earn a profit of Rs. 28 lakhs

20. A company earned a profit of ₹ 30,000 during the year 2014. If the marginal cost and selling price of
the product are ₹ 8 and ₹ 10 per unit respectively, find out the amount of margin of safety.

21. ABC Ltd. can produce 4,00,000 units of a product per annum at 100% capacity. The variable
production costs are ₹ 40 per unit and the variable selling expenses are ₹ 12 per sold unit. The budgeted
fixed production expenses were ₹ 24,00,000 per annum and the fixed selling expenses were ₹ 16,00,000.
During the year ended 31st March, 2014, the company worked at 80% of its capacity. The operating data
for the year are as follows:
Production 3,20,000 units
Sales @ ₹ 80 per unit 3,10,000 units
Opening stock of finished goods 40,000 units

Fixed production expenses are absorbed on the basis of capacity and fixed selling expenses are
recovered on the basis of period.
You are required to prepare Statements of Cost and Profit for the year ending 31st March, 2014:
1. On the basis of marginal costing 2. On the basis of absorption costing

22. An automobile manufacturing company produces different models of Cars. The budget in respect of
model 007 for the month of March, 2015 is as under:
Budgeted Output 40,000 Units
₹ In lakhs ₹ In lakhs
Net Realisation 700
Variable Costs:
Materials 264
Labour 52
Direct expenses 124 440
Specific Fixed Costs 90
Allocated Fixed Costs 112.50 202.50
Total Costs 642.50
Profit 57.50
Sales 700.00
 Calculate:
(i) Profit with 10 percent increase in selling price with a 10 percent reduction in sales volume.
(ii) Volume to be achieved to maintain the original profit after a 10 percent rise in material costs, at the
originally budgeted selling price per unit.

23 PQR Ltd. reports the following cost structure at two capacity levels:
(100% capacity) (75% capacity)
2,000 units 1,500 units
Production overhead I ₹ 3 per unit ₹ 4 per unit
Production overhead II ₹ 2 per unit ₹ 2 per unit
If the selling price, reduced by direct material and labour is ₹ 8 per unit, what would be its break-even
point?

24. The following figures are related to LM Limited for the year ending 31st March, 2014 : Sales - 24,000
units @ ₹ 200 per unit;
P/V Ratio 25% and Break-even Point 50% of sales. You are
required to calculate:
(i) Fixed cost for the year
(ii) Profit earned for the year
(iii) Units to be sold to earn a target net profit of ₹ 11,00,000 for a year.
(iv) Number of units to be sold to earn a net income of 25% on cost.
(v) Selling price per unit if Break-even Point is to be brought down by 4,000 units.

25. The following information is given by Star Ltd.:

Margin of Safety ₹ 1,87,500
Total Cost ₹ 1,93,750
Margin of Safety 3,750 units
Break-even Sales 1,250units
Required:
Calculate Selling Price Per unit, Profit, P/V Ratio, BEP Sales (in₹) and Fixed Cost.

26. A Chinese soft drink company is planning to establish a subsidiary company in India to produce
mineral water. Based on the estimated annual sales of 40,000 bottles of the mineral water, cost studies
produced the following estimates for the Indian subsidiary:
Total annual costs Percent of Total Annual
Cost which is variable
Material 2,10,000 100%
Labour 1,50,000 80%
Factory Overheads 92,000 60%
Administration Expenses 40,000 35%
The Indian production will be sold by manufacturer’s representatives who will receive a commission of 8%
of the sale price. No portion of the Chinese office expenses is to be allocated to the Indian subsidiary. You
are required to
(i) Compute the sale price per bottle to enable the management to realize an estimated 10% profit on sale
proceeds in India.
(ii) Calculate the break-even point in Rupee sales as also in number of bottles for the Indian subsidiary on
the assumption that the sale price is ₹ 14 per bottle.

27. You are given the following data :

Sales Profit
Year 2013 ₹ 1,20,000 8,000
Year 2014 ₹ 1,40,000 13,000
Find out –
(i) P/V ratio,
(ii) B.E. Point,
(iii) Profit when sales are ₹1,80,000,
(iv) Sales required earn a profit of ₹12,000,
(v) Margin of safety in year 2014.
12.
(₹)

(i) Ascertain profit, when sales = 2,00,000

Fixed Cost = 40,000
BEP = 1,60,000
(ii) Ascertain sales, when fixed cost = 20,000
Profit = 10,000
BEP = 40,000

29. There are two similar plants under the same management. The management desires to merge these
plants. The following particulars are available:-
Particulars Factory 1 Factory 2
Capacity operation 100% 60%
Sales ₹ 300 Lakhs ₹ 120 Lakhs
Variable Costs ₹ 220 Lakhs ₹ 90 Lakhs
Fixed Costs ₹ 40 Lakhs ₹ 20 Lakhs
You are required to calculate:-
i. What would be capacity of the merged plant to be operated for the purpose of break-even and
ii. What would be the profitability on working at 75% of the merged capacity ?

30. X Co Ltd. Manufactures and sells four products A,B,C and D. The total budgeted sales (100%) are Rs.
6,00,000 per month. The Fixed Costs are Rs. 1,59,000 per month.
Sales mix in value comprises of :-
Product Present % Proposed
%
A 33.33% 25%
B 41.67% 40%
C 16.67% 30%
D 8.33% 5%
The operating cost as a % of selling prices are:-
A-60%, B-68%, C-80% and D -40%
Calculate break even sales for the company for both these periods.

31. M ltd. Manufactures three products P, Q and R. The unit selling prices of these products are Rs.
100, Rs. 80 and Rs. 50 respectively. The corresponding unit variable cost are Rs. 50, Rs. 40 and Rs. 20/
the proportions (quantity-wise) in which these products are manufactured and sold are 20%, 30% and
50% respectively. Total fixed cost are Rs. 14,80,000. Given the above information, you are required to
work out the over all break-even quantity and the product-wise break-up of such quantity.

32. A company has fixed cost of ₹ 90,000, Sales ₹ 3,00,000 and Profit of ₹ 60,000. Required:
(i) Sales volume if in the next period, the company suffered a loss of ₹ 30,000.
(ii) What is the margin of safety for a profit of ₹ 90,000?

33. You are given the following data for the year 2007 of Rio Co. Ltd:
Variable cost 60,000 60%
Fixed cost 30,000 30%
Net profit 10,000 10%
Sales 1,00,000 100
Find out (a) Break-even point, (b) P/V ratio, and (c) Margin of safety.

34. MNP Ltd sold 2,75,000 units of its product at ₹ 37.50 per unit. Variable costs are ₹ 17.50 per unit
(manufacturing costs of ₹ 14 and selling cost ₹ 3.50 per unit). Fixed costs are incurred uniformly
throughout the year and amount to ₹ 35,00,000 (including depreciation of ₹15,00,000). there are no
beginning or ending inventories. Required:
a) Estimate breakeven sales level quantity and cash breakeven sales level quantity.
b) Estimate the P/V ratio.
c) Estimate the number of units that must be sold to earn an income (EBIT) of ₹ 2,50,000.
d) Estimate the sales level achieve an after-tax income (PAT) of ₹ 2,50,000. Assume 40% corporate
Income Tax rate.
35. You are given the following particulars calculate:
(a) Break-even point
(b) Sales to earn a profit of ₹ 20,000
i. Fixed cost ₹ 1,50,000
ii. Variable cost ₹ 15 per unit
iii. Selling price is ₹ 30 per unit

36. The product mix of a Gama Ltd. is as under:

Products
M N
Units 54,000 18,000
Selling price ₹ 7.50 ₹ 15.00
Variable cost ₹ 6.00 ₹ 4.50
Find the break-even points in units, if the company discontinues product ₹M’ and replace with product
₹O’. The quantity of product ₹O’ is 9,000 units and its selling price and variable costs respectively are ₹
18 and ₹ 9. Fixed Cost is ₹ 15,000.
37. Zed Limited sells its product at ₹ 30 per unit. During the quarter ending on 31 st March, 2014, it
produced and sold 16,000 units and' suffered a loss of ₹ 10 per unit. If the volume of sales is raised to
40,000 units; it can earn a profit of ₹ 8 per unit.
You are required to calculate:
(i) Break Even Point in Rupees.
(ii) Profit if the sale volume is 50,000 units.
(iii) Minimum level of production where the company needs not to close the production if unavoidable
fixed cost is ₹ 1,50,000.

38. A Ltd. maintains margin of safety of 37.5% with an overall contribution to sales ratio of 40%. Its
fixed costs amount to ₹ 5 lakhs.
Calculate the following:
i. Break-even sales
ii. Total sales
iii. Total variable cost
iv. Current profit
v. New ₹margin of safety’ if the sales volume is increased by 7 ½ %.

39. A Company sells two products, J and K. The sales mix is 4 units of J and 3 units of K. The
contribution margins per unit are ₹ 40 for J and ₹ 20 for K. Fixed costs are ₹ 6,16,000 per month. Compute
the break-even point.

40. Mega Company has just completed its first year of operations. The unit costs on a normal costing
basis are as under:
(₹)
Direct material 4 kg @ ₹ 4 = 16.00
Direct labour 3 hrs @ ₹ 18 = 54.00
Variable overhead 3 hrs @ ₹ 4 = 12.00
Fixed overhead 3 hrs @ ₹ 6 = 18.00
100.00
Selling and administrative costs:
Variable ₹ 20 per unit
Fixed ₹ 7,60,000
During the year the company has the following activity:

Units produced = 24,000

Units sold = 21,500
Unit selling price = ₹ 168
Direct labour hours= 72,000
worked
Actual fixed overhead was ₹ 48,000 less than the budgeted fixed overhead. Budgeted variable
overhead was ₹ 20,000 less than the actual variable overhead. The company used an expected actual
activity level of 72,000 direct labour hours to compute the predetermine overhead rates.
 Required:
(a) Compute the unit cost and total income under:
i. Absorption costing
ii. Marginal costing
(b) Under or over absorption of overhead.
(c) Reconcile the difference between the total income under absorption and marginal costing.

41. A Ltd is having a proposal to purchase two machines X and Y. the cost structure for the products
with these two machines is as follows:-
Particular Machine X Machine Y
Variable Cost per unit Rs. 6.00 Rs. 4.00
Fixed Cost Rs. 2,00,000 Rs. 3,00,000
Selling Price per unit Rs. 10 Rs. 10
What is cost indifference point? Which machine should be preferred and when ?

42. A company had incurred fixed expenses of ₹ 4,50,000, with sales of ₹ 15,00,000 and earned a profit
of ₹ 3,00,000 during the first half year. In the second half, it suffered a loss of Rs. 150000. Calculate:
(i) The profit-volume ratio, break-even point and margin of safety for the first half year.
(ii) Expected sales volume for the second half year assuming that selling price and fixed expenses
remained unchanged during the second half year.
(iii) The break-even point and margin of safety for the whole year.

43. A company has a P/V ratio of 40%. By what percentage must sales be increased to offset: 20%
reduction in selling price?

44. Two firms A & Co. and B & Co. sell the same product in the same market. Their budgeted profit and
loss account for the year ending 31st march, 2016 are as follows:-
Particulars A & Co. B & Co.
(Rs.) (Rs.)
Sales 5,00,000 6,00,000
Variable Costs 4,00,000 4,00,000
Fixed Costs 30,000 70,000
Net Profit 70,000 1,30,000
Required:
1. Calculate at which sales volume both the firms will earn equal profit.
2. State which firm is likely to earn greater profits in condition of:
a. Heavy demand for the product
b. Low demand for the product. Give
reasons.

45. By noting “P/V will increase or P/V will decrease or P/V will not change”, as the case may be, state
how the following independent situations will affect the P/V ratio:
(i) An increase in the physical sales volume;
(ii) An increase in the fixed cost;
(iii) A decrease in the variable cost per unit;
(iv) A decrease in the contribution margin;
(v) An increase in selling price per unit;
(vi) A decrease in the fixed cost;
(vii) A 10% increase in both selling price and variable cost per unit;
(viii) A 10% increase in the selling price per unit and 10% decrease in the physical sales volume;

46. The P/V Ratio of Delta Ltd. is 50% and margin of safety is 40%. The company sold 500 units for ₹
5,00,000. You are required to calculate:
(i) Break- even point, and
(ii) Sales in units to earn a profit of 10% on sales

46. If P/V ratio is 60% and the Marginal cost of the product is ₹ 20. What will be the selling price?

47. If sales ` 20,00,000, variable cost 15,00,000 and fixed cost 2,00,000, calculate the following:
(a) Profit Volume Ratio
(b) Break-even Point
(c) Sales required to earn profit of ` 5,00,000
48. ABC Limited started its operation in the year 2013 with a total production capacity of 2,00,000 units.
The following information, for two years, are made available to you:
Year Year
2013 2014
Sales (units) 80,000 1,20,000
Total Cost (₹) 34,40,000 45,60,000
There has been no change in the cost structure and selling price and it is anticipated that it will
remain unchanged in the year 2015 also. Selling price is ₹ 40 per unit. Calculate :
i. Variable cost per unit.
ii. Profit Volume Ratio.
iii. Break-Even Point (in units)
iv. Profit if the firm operates at 75% of the capacity.

49. SK Lit. is engaged in the manufacture of tyres. Analysis of income statement indicated a profit of ₹ 150
lakhs on a sales volume of 50,000 units. The fixed costs are ₹ 850 lakhs which appears to be high.
Existing selling price is ₹ 3,400 per unit. The company is considering to revise the profit target to ₹ 350
lakhs. You are required to compute –
(i) Break- even point at existing levels in units and in rupees.
(ii) The number of units required to be sold to earn the target profit.
(iii) Profit with 15% increase in selling price and drop in sales volume by 10%.
(iv) Volume to be achieved to earn target profit at the revised selling price as calculated in (ii) above, if
a reduction of 8% in the variable costs and ₹ 85 lakhs in the fixed cost is envisaged.

50. Mr. X has ₹ 2,00,000 investments in his business firm. He wants a 15 per cent return on his
money. From an analysis of recent cost figures, he finds that his variable cost of operating is 60 per
cent of sales, his fixed costs are ₹ 80,000 per year. Show computations to answer the following
questions:
(i) What sales volume must be obtained to break even?
(ii) What sales volume must be obtained to get 15 per cent return on investment?
(iii) Mr. X estimates that even if he closed the doors of his business, he would incur ₹ 25,000 as
expenses per year. At what sales would he be better off by locking his business up?

51. Following information is available.

Year Sales Profit
2013 10,00,000 1,00,000
2014 15,00,000 2,00,000

Calculate:
(a) Profit Volume Ratio.
(b) Sales required to earn profit of ` 4,00,000.
(c) Profit when sales are 20,00,000.

52. Following information is available

Year Sales Cost
2013 16,00,000 15,76,800
2014 20,52,000 19,22,400
From the above information, calculate: (A) P/V Ratio, (B) Fixed Ratio, (C) Break-even Point and
(D) Profit/loss when sales 12,96,000.

53. From the following particulars, you are required to calculate:

1. Profit Volume Ratio;
2. Break-even Point;
3. Profit when sale is ` 2,00,000;
4. Sales required to earn to earn a profit of ` 40,000;
5. Margin of safety in the 2nd year.
Year Sales ` Profit `
I 2,40,000 18,000
II 2,80,000 26,000
You may assume that the cost structure and selling prices remain constant in the two years.
54. The following data have been extracted from the books of Alfa Ltd.
Year Sales ` Profit `
2014 5,00,000 50,000
2015 7,50,000 1,00,000

You are required to calculate:

(i) P/V Ratio
(ii) Fixed Cost
(iii) Break-even Sales
(iv) Profit on Sales of ` 4,00,000
(v) Sales to earn of profit of ` 1,25,000.

55. Z Ltd. produces and sells a single article at `10 each. The marginal cost of production is ` 6 each and fixed
cost is ` 400 per annum. Calculate:
1. P/V Ratio
2. The break-even sales (in ` and numbers)
3. The sales to earn profit of ` 500.
4. Profit at sales of ` 3000.
5. New break-even point if sales price is reduced by 10%.
6. Margin of safety at sales of ` 1,500.
7. Selling price per unit if the break-even point is reduced to 80 units.

56. A product is sold at ` 80 per unit. Its variable cost is ` 60 and fixed cost is
` 6,00,000. Compute the following:
1. P/V Ratio
2. Break-even Point
3. Margin of safety at a sale of 50,000 units.
4. At what sale, the producer will earn profit at 15% on sales?

57. From the following data, compute:

1. P/V Ratio
2. BEP in rupees and unit.
3. Number of units to be sold to earn a profit of ` 7,50,000.
Sales Price ` 20 per unit
Direct Material ` 5 per unit
Direct Wages ` 6 per unit
Variable Administration Overheads ` 3 per unit Fixed Factory
Overheads ` 6,40,000 per year
Fixed Administration Overhead ` 1,52,000 per year

58. The XL Ltd. furnish the following information:

Ist Period IInd Period

Sales 20,00,000 30,00,000

Profit 2,00,000 4,00,000
You are required to calculate:
1. P/V Ratio
2. Fixed Expenses
3. BEP
4. Sales to earn profit ` 5,00,000
5. Profit when sales are ` 15,00,000

59. Following particulars are available for A Ltd. and B Ltd. Calculate for each company:
Particulars A Ltd. B Ltd.
Sales ` 6,00,000 ` 6,00,000
P/V Ratio 25% 20%
Fixed Cost ` 90,000 ` 80,000
(i) Break-even Point
(ii) Margin of Safety
(iii) Sales required to earn profit of ` 90,000
60. M/s EAR Enterprises furnishes the following information:

Year Sales (`) Profit (`)

2013 6,00,000 60,000
2014 8,00,000 1,00,000
From the above, calculate the following information:
(i) P/V Ratio
(ii) Fixed Cost
(iii) Break-even Cost
(iv) Sales to earn profit ` 2,00,000
(v) Margin of Safety of 2014.

61. From the following particulars, you are required to calculate:

(i) Fixed Cost
(ii) Profit Volume Ratio
(iii) Break-even Sales
(iv) Sales to earn profit of ` 6,00,000
(v) Margin of Safety of the year 2012
Particulars 2012 (`) 2013 (`)
Total Cost 12,96,000 18,72,000
Sales 14,40,000 21,60,000

62. The following is the cost structure of a product Selling price ` 100 per unit.
Variable cost per unit:

Material ` 38
Labour ` 14
Direct Expenses `8
Fixed overheads for the year:
Factory Overheads ` 2,80,000
Office Overheads ` 2,20,000
No. of Units Produced and Sold 40,000
Calculate:
1. P/V Ratio
2. Break-even Point in units
3. Margin of Safety Amount
4. Break-even Point if fixed overheads increased by 20%.
5. Revised P/V Ratio when selling price increased by 20%.

63. A company produces and sells 1,500 units of a commodity at ` 20 each. The variable cost of the
production is ` 12 per unit and fixed cost ` 8,000 per annum. Calculate:
(i) P/V Ratio
(ii) Sales at break-even point
(iii) Additional sales required to earn the same amount of profit if selling price is reduced by 10%.

64. KT & Co. has prepared the following budget estimated for the year 2005-06: sales 15,000 units, sales
value ` 1,50,000, fixed expenses ` 34,000 and variable per unit ` 6/-. You are required to find: (i) Profit
Volume Ratio, (ii) Break-even Point and (iii) Margin of safety. Also calculate revised Profit Volume Ratio,
Break-even Point and Margin of Safety, if selling price per unit is reduced by 10%.

65. Following information is available

Period I II
Sales (` lakhs) 150 200
Profit (` lakhs) 30 50
Find P/V Ratio, Fixed Cost, Break-even Point; Sales to earn profit of ` 90 lakhs and Profit at sales of ` 280
lakhs.
66. From the following particulars, you are required to calculate: (i) Profit volume ratio,(ii) Break-even point, (iii)
Profit when sale is ` 2,00,000, (iv) Sales required to earn profit of ` 40,000 and (v)Margin of safety in the year
2nd year.
Year Sales ` Profit `
I 2,40,000 18,000
II 2,80,000 26,000

67. Jayashree Enterprises present the following information to you relating to the half year ended 30-6-2004:
Fixed Expenses : ` 45,000
Sales : ` 1,45,000
Profit : ` 30,000
During the second half year of 2004, the company had projected a loss of ` 10,000. You are required to
calculate:
1. The break-even point and margin of safety for the six months ended 30.6.2004.
2. Expected sales in the second half year assuming that P/V ratio and fixed expenses remain constant in
the second half year also.
3. The break-even point and margin of safety for the whole of 2004.

68. A customer produces and sells 100 units of A per month at ` 20. Marginal cost per unit is ` 12.00 and fixed
costs are ` 300 per month. It is proposed to reduce the selling price by 20%. Find the additional sales required
to earn the same profit as before.

69. If the Budgeted output is 80,000 units, Fixed cost is Rs. 4,00,000, Selling price per unit is Rs. 20 and
variable cost per unit is Rs. 10, find out BEP sales, BEP in units, P/V ratio and indicate the margin of safety.

70. From the following information calculate :

(a) Break – Even Point.

(b) P/V Ration
(c) Profit
(d) Profit at 75% capacity,
(e) Profit at 100% capacity
(1) Budgeted Sales Rs. 2,00,000 (80% capacity)
(2) Direct Materials 30% of Sales.
(3) Direct labor 20% on sales.
(4) Variable Overheads (Factory) 10% on sales.
(5) Variable Overheads (Administration) 15% of sales.
(6) Fixed Cost Rs. 30,000

71. Company X and Company Y, both under the same management, makes and sells the
same type of product. This budgeted Profit and Loss Accounts for January – June, 2005, are
as under :
Company Company
`X’ `Y’
Particulars Rs. Rs. Rs. Rs.
Sales 6,00,000 6,00,000
Less : Variable 4,80,000 4,00,000
Cost
Fixed Cost 60,000 5,40,000 1,40,000 5,40,000
Profit 60,000 60,000
You are required to :
(i) Calculate the Break-Even Point for each company.
(ii) Calculate the sales volume at which each of the two companies with profit of
Rs. 20,000.
(iii) Calculate margin of Safety for both the companies.
72. Following information is available
(a) X Ltd. has earned contribution of Rs. 2,00,000 and net profit of Rs. 1,50,000 on sales
of Rs. 8,00,000. What is its margin of safety ?
(b) If margin of safety is Rs. 2,40,000 (40% of sales) and P/V Ratio is 30% of AB Ltd.,
calculate its
i)Break even sales and (ii) Amount of profit on sales of Rs. 9,00,000.
(c) A company sells its product at Rs. 15 per unit. In a period, if it produces and sells
8,000 units, in incurs a loss of Rs. 5 per unit. If the volume is raised to 20,000 units, it
earns a profit of Rs. 4 per unit. Calculate break- even point both in terms of rupees as
well as in units.
(d) A company earned a profit of Rs. 30,000 during the year 1994-95. If the marginal cost
and selling price of a product are Rs. 8 and Rs. 10 per unit respectively, find out the
amount of `Margin of Safety’.
(e) The profit volume (P/V) ration of B B & Co. dealing in precision instruments is 50%
and the margin of safety is 40%.
You are required to work out the break-even point and the net profit if the sale volume is
Rs. 50 lakhs.
(f) Comment on the economic soundness of the followint firms :
Firm A Firm B
Current Sales Volume 3,00,000 3,00,000
Break Even Sales Volume 2,00,000 2,00,000
Margin of Safety 1,00,000 1,00,000
Fixed Cost 1,00,000 60,000
(g) A company has a P/V Ratio of 40 per cent. By what percentage must sales be
increased to offset :
(i) 10 per cent reduction in selling price and
(ii) 20 per cent reduction in selling price

73. A company has annual fixed costs of Rs. 14,00,000. In 2001 sales amounted to Rs, 60,00,000 as
compared with Rs. 45,00,000 in 2000 and profit in 2001 was Rs. 4,20,000 higher than in 2000 :
(i) At what level of sales does the company break-even ?
(ii) Determine profit or loss on a present sales volume of Rs. 80,00,000.
(iii) If there is reduction in selling price in 2002 by 10% and the company desires to earn
the same profit as in 2001, what would be the required sales volume ?

73. You are given the following information for the next year.
Year Units
Sales (10,000 units) …………… 1,20,000
Variable Cost …………… 48,000
Fixed Cost …………… 60,000

1) Find out the P. V. Ratio, Break-even point and the margin of safety.
2) Evaluate the effect of following on P. V. Ratio, Break-even point and the margin
of safety.
a) 10% increase in Variable Cost.
b) 10% decrease in Variable Cost.
c) 10% increase in Fixed Cost.
d) 10% decrease in Fixed Cost.
e) 10% increase in Physical Sales Volume.
f) 10% decrease in Physical Sales Volume.
g) 5% increase in Selling Price.
h) 5% decrease in Selling Price.
i) 10% increase in Selling Price and 10% decrease in Physical Sales Volume.
j) 5% decrease in Selling Price and 10% increase in Physical Sales Volume.
74. AB Ltd. and LM Ltd. are manufacturing the same product. The Profit & Loss details are as under :

Particulars AB Ltd. LM Ltd.

Rs. Rs.
Sales …………… 10,00,000 10,00,000
Less : Variable Cost …………… 4,00,000 6,00,000

…………… 6,00,000 4,00,000

Less : Fixed Cost …………… 3,00,000 1,00,000

Profit …………… 3,00,000 3,00,000

You are required to:
1)Calculate Contribution / Sales ratio for each company.
2)Calculate BEP for each company.
3)Profits of each company if sales increase by 20%.
4)Profits of each company if sales decrease by 20%.
5)Comment on the profitability of both companies.

75. The Vijaya Electronics Co. furnishes you the following income information of the year 1995.
Particulars First Half Second Half
Sales …………… 4,05,000 5,13,000
Profit …………… 10,800 32,400

From the above table you are required to compute the following assuming that the fixed cost
remains the same in both the periods. P/V Ratio
1. Fixed Cost
2. Break-even point
3. Variable Cost for first and second half of the year
4. The amount of Profit or Loss where sales are Rs. 3,24,000.
5. The amount of sales required to earn a profit of Rs. 54,000.

76. National Plastic Ltd. manufacturing chairs provides the following information:
Fixed cost Rs. 50,000 for the year Variable cost Rs. 20
per chair Capacity Rs. 2,000 chairs per year Selling price
Rs. 70 per chair
From the above mentioned information:
i) Find the Breakeven point
ii) Find the number of chairs to be sold to get a profit of
Rs. 30,000
iii) Find out Breakeven point and sales if the selling price changes to Rs. 60 per chair.
iv) If the company can manufacture 600 chairs more per year with an additional fixed cost
of Rs. 2,000, what should be the selling price to maintain profit per chair as at (ii) above?

77. Sunil Ltd. had prepared the following budget estimates for the year 2004 :

Sales Units Rs. 15,000

Fixed Expenses Rs. 34,000
Sales Value Rs. 1, 50,000
Variable Costs Rs. 6 per unit
You are required to:
i) Find out the P/V Ratio, Break Even Point and Margin of Safety.
ii) Calculate the revised P/V Ratio, Break Even Point and Margin of Safety in each
of the following cases :
a) Decrease of 10% in the selling price
b) Increase of 10% in the variable costs
c) Increase of sales volume by 2,000 units
d) Increase of ` 6,000 in fixed costs.
78. Cost of Production (10000 units)
Per Unit Total
(Rs. P) (Rs)
Variable cost 1.50 15000
Fixed Cost 0.25 2500
---------
Total cost 17500
---------
Sales 5000 units at Rs. 2.50 per unit Rs. 125000
Closing stock 5000 units at Rs. 1.75 Rs. 8750
Prepare income statement Under absorption costing and marginal costing.

79. From the following information

A. Calculate the amount of contribution and profit.

Rs.
Sales 1000000
Variable cost 600000
Fixed cost 150000
B. Determine the amount of fixed cost
Rs.
Sales 300000
Variable cost 200000
Profit 50000
C. Determine the amount of variable cost
Rs.
Sales 500000
Fixed cost 100000
Profit 100000

80. From the following data calculate:

(a) P/V Ratio (b) Variable Cost and (c) Profit

Rs.
Sales 80000

Fixed expenses 15000

Break even point 50000

81. The sales turnover and profit during two years were as follows:

Year Sales (Rs.) Profit (Rs.)

1991 140000 15000

1992 160000 20000

Calculate:

(a) P/V Ratio (b) Break-even point (c) Sales required

to earn a profit of
Rs.40000

(d) Fixed expenses and (e) Profit when sales are Rs.120000
82. From the following information, calculate
a. Break-even point
b. Number of units that must be sold to earn a profit of
Rs.60000 per year.
c. Number of units that must be sold to earn a net income of
10% on sales
Sales Price -Rs.20 per unit
Variable cost -Rs.14 per unit
Fixed cost -Rs.79200

83. The P/V Ratio of a firm dealing in precision instruments is 50% and margin of safety is
40%. You are required to work-out break even point and the net profit if the sales volume is
Rs.5000000. If 25% of variable cost is labour cost, what will be the effect on BEP and profit
when labour efficiency decreases by 5%.

84. From the following find out the break even point
P Q R
Selling price Rs 100 80 50
Variable cost Rs. 50 40 20
Weightage 20% 30% 50%

Fixed cost Rs 1480000

85. Calculate BEP in units and value for the following:

Total cost Rs. 50000

Total variable cost Rs. 30000
Sales (5000 units) Rs. 50000

86. A Ltd. has two factories X and Y producing same article whose selling price is Rs. 150 per
unit. Other details are:

X Y
Capacity in units 10000 15000
Variable cost per unit (Rs) 100 120
Fixed expenses (Rs) 300000 210000
Determine the BEP for the two factories assuming constant sales mix also composite BEP.

87. From the following data calculate

Break even point (Units)
If sales are 10% and 15% above the break even sales volume determine the net profit.
Selling price per unit - Rs.10
Direct material per unit - Rs. 3
Fixed overheads - Rs. 10000
Variable overheads per unit – Rs.2
Direct labour cost per unit - Rs. 2

88. You are given the following data for the year 1986 for a factory. Output: 40000
units
Fixed expenses: Rs.200000
Variable cost per unit: Rs.10
Selling price per unit: Rs.20
How many units must be produced and sold in the year 1987, if it is anticipated that selling
price would be reduced by 10%, variable cost would be Rs.12 per unit, and fixed cost will
increase by 10%? The factory would like to make a profit in 1987 equal to that of the profit in
1986.