Case study (compulsory)

The operating statement of Joyel fem Ltd. exhibited the following results for the month of
October, 2009. Analyze the case and answer the questions given the end.

Net sales Rs. 2, 00,000

Cost of Sales Rs. 1, 20,000
Gross Profit Rs. 80,000
Distribution Cost Rs. 40,000
Administration Cost Rs. 20,000
Net Profit Rs. 20,000

The break down of various costs into fixed and variable is as under.
Fixed Variable
Rs. Rs.
Cost of sales 40,000 80,000
Distribution Costs 30,000 10,000
Administration costs 20,000 Nil

You are required to answer the following questions.

1) Define break even analysis? Discuss its limitations.(5 Marks)
2) What was the break-even point for October? ( 5 Marks)
3) What would be the effect on profit if variable expenses come to be 50% of the sales?
(5 Marks)
4) What would be the effect on profit of sales increases by 10%? ( 5 Marks)