FORMULAE

1. A. Profit volume ratio (P/V Ratio )= Contribution/sales*100

OR

= (Sales- Variable cost)/sales*100

OR
=(Net profit +Fixed cost)/sales*100

B. P/V Ratio= change in profit/change in sales*100 ( ∆ in profit/∆ in sales*100)

2. Break-Even Point (BEP):

A. BEP (units)= Fixed Cost/contribution per unit

B. BEP (Value)= Fixed cost/p/v ratio

3. Sales required to earn desired profit:

A. Sales required to earn desired profit (Units)= (FC + Desired profit)/ contribution p.u.

FC + Profit
B. Sales required to earn desired profit (Value)=
P/v ratio

4. Margin of Safety (MOS)

A. MOS (units)= Actual sales in units – BEP Sales in units

B. MOS (Value)= Actual sales value – BEP Sales value
 ILL 1.

Particulars P.U Total (actual sale= 4800 units) (n-4)

SALES 20 96,000
(-) VC (15) (72,000)
CONT 5 24,000
(-) FC (4.17) 20,000
Net profit/loss 0.83 4000

1. p/v ratio= contribution/sales*100

= 5/20*100
=25%

2. BEP (value)= FC / p/v ratio

= 20,000/25%
= Rs.80,000

BEP (units)=FC/contribution p.u.

=20,000/5
=4000units

3. Sales to earn profit Rs.500

Sales to earn desired profit (units) = (FC + Profit)/ cont p.u

=(20,000+500)/5

=4100 units

Sales to earn desired profit (value) = FC + Profit/ p/v ratio

=(20,000+500)/ 25%

=20,500/25%

= Rs.82,000

4. Actual sales=20% above BEP sales

Actual sales (Rs.) = 80,000+20%=Rs. 96,000

Actual Sales (units)= 4000 + 20% = 4800 units

 Total PU

Sales 96,000 20

(-)VC (72,000) 15

CONT 24000 5

(-)FC (20,000)

PROFIT 4000

Soln 2:

Total variable cost=Material cost + Labour Cost= 11+3=Rs. 14 p.u.

Total Fixed cost= 5,40,000+2,52,000=Rs. 7,92,000

pu

SALES 20

(-) VC (14)

Contribution 6

(-) FC 7,92,000

Profit

1. P/V RATIO=contribution/sales*100
=6/20*100
=30%

2. BEP (Value)= FC/p/v ratio

= 7,92,000/30%
=Rs. 26,40,000

BEP (units)= FC/cont pu

=7,92,000/6
=1,32,000 units

3. Sales to earn desired profit (units)= (FC + Desired profit)/ contribution p.u.
=(7,92,000 + 1,60,000)/ 6
=1,58,667 units

Sales to earn desired profit (value)= (FC + Desired profit)/ pv ratio

= (7,92,000 + 1,60,000)/30%
 = Rs. 31,73,333

Sol: 3

1 st Period:

Sales 2,00,000

(-) VC (2) 1,00,000

Cont (1) 1,00,000

(-)FC 50,000

Profit 50,000

N1. Contribution – FC = profit

C – 50,000=50,000

C=50,000 + 50,000

C= 1,00,000 Rs.

N2. Sales – VC = Contr

2,00,000 – VC = 1,00,000

2,00,000-1,00,000=VC

1,00,000 = VC

Pv= 50%

BEP (VALUE)= Rs.1,00,000

MOS (value)= Actual sales – BEP sales

=2,00,000-1,00,000

=Rs. 1,00,000

PERIOD 2:

Sales

(-) VC

Contr(n1) 40,000

(-) FC 50,000

Loss (10,000)

N1. Cont – FC =loss

C – 50,000 = -10,000

C= -10,000+50,000
C= 40,000

p/v of second period= 50%

cont/sales*100=50

40,000/sales*100=50

40,000*100/50=sales

Rs.80,000= sales

SOL: (TYPE 2)

Period 2012 2013

Sales 5,00,000 7,50,000

Profit 50,000 1,00,000

1. P/V Ratio= ∆ in profit/∆ in sales*100

=(1,00,000-50,000/7,50,000-5,00,000)*100
=50,000/2,50,000*100
=20%
2. Pv ratio 20% means, contribution is 20% of sales i.e. contr=20%*5,00,000=1,00,000

Pv ratio= con/sales*100

20%= cont/5,00,000*100

20*500000/100=Rs.100000

3.

2012

Sales 5,00,000 (given)

(-)VC 4,00,000 (5L-1L)

CONT 1,00,000 (n-2)

(-)FC 50,000 (1L-50K)

Profit 50,000 (given)

4. BEP (value) = FC / p/v

=50,000/20%
=Rs. 2,50,000
 5. Profit on sales of Rs.4,00,000

FC + Profit
Sales required to earn desired profit=
P∕ v
50,000+ Profit
4,00,000 =
20 %
4,00,000*20%=50,000+profit

80,000=50,000+profit

80,000-50,000=profit

Rs. 30,000=profit

6. Sales to earn profit Rs.1,25,000

FC + Profit
Sales req to earn des profit=
P∕v
= 50,000+125000/20%
=175000/20%
=Rs. 875000

1. Pv ratio 25% means, contribution is 25% of sales i.e. contr=25%*9,00,000=2,25,000

Sales 9,00,000

(-)VC 6,75,000 (900000-225000) i.

CONT 2,25,000

(-)FC 1,05,000

Profit 1,20,000

ii. BEP (Rs.) = FC/P/V ratio

=105000/25%

= Rs. 4,20,000

BEP=FC/pv=1,05,000/25%=4,20,000

iii. Sales required to earn profit Rs.2,40,000

FC + Profit
Sales req to earn des profit (Rs)=
P∕ v
1,05,000+ 2,40,000
=
25 %
=13,80,000

iv. profit when sales are Rs. 15,00,000

FC + Profit
Sales req to earn des profit (Rs) =
P∕v
1,05,000+ Profit
15,00,000=
25 %
15,00,000*25%=1,05,000+profit
3,75,000-1,05,000=profit
Rs. 2,70,000

SOL:
Total Variable cost p.u.=38+14+8= Rs. 60
Total FC p.a.= 2,80,000+2,20,000=Rs. 5,00,000

P.U. Total (40,000 units)

Sales 100 40,00,000
(-) VC 60 24,00,000
Contribution 40 16,00,000
(-) FC 5,00,000
Profit 11,00,000

1. P/V Ratio= Contribution/sales*100

= 40/100*100= 40%

2. BEP (units)= FC/contribution p.u.

= 5,00,000/40
= 12,500 units
BEP (Amt)= FC/ p/v Ratio
=5,00,000/40%
= Rs. 12,50,000

3. MOS (amt)= Actual sales in Amt- BEP sales in amt

=40,00,000 – 12,50,000
=Rs. 27,50,000

4. Fixed OH= Rs. 5,00,000

If FOH increase by 20%= 5,00,000+20%=Rs. 6,00,000

BEP (amt)= FC/pv ratio

=6,00,000/ 40%
 = Rs. 15,00,000
BEP (units)= FC/cont p.u.
= 6,00,000/40
=15,000 units

5. Revised pv ratio if selling price increase by 20%

New sp=100+20%= Rs.120 p.u.

Sales 120
(-) VC 60
Contr 60

p/v ratio= contribution/sales*100

60/120*100
= 50%

SOL:

Sales
(-) VC
Contribution(1) 1,10,000
(-) FC 80,000
Profit 30,000

Wn1= Cont – FC =Profit

Cont – 80,000=30,000
Cont= 30,000+80,000
=1,10,000

p/v ratio= 25%

p/v= cont/sales*100

25=1,10,000/sales*100
Sales=1,10,000*100/25
Sales=Rs. 4,40,000

BEP (amt)=FC/pv
=3,20,000Rs.

MOS=act sales – BEP sales

=Rs. 1,20,000

SOL:
 A Ltd B Ltd.
Sales 6,00,000 6,00,000
(-) vc(s-c) 4,50,000 4,80,000
Contr(1) 1,50,000 1,20,000
(-) FC 90,000 80,000
Profit 60,000 40,000

A Ltd.
Pv ratio 25% means, contribution is 25% of sales
Therefore, contribution= 25%*6,00,000= Rs. 1,50,000
B Ltd.
Pv ratio 20% means, contribution is 2% of sales
Therefore, contribution= 20%*6,00,000= Rs.1,20,000

1. BEP= FC/pv ratio

A
90,000/25% =3,60,000
B
80,000/20% =4,00,000