Class notes BBA

Solution: CVP Analysis - Pukhran Ltd.

CVP Analysis - Step-by-Step Solution



Given:

Year Sales (Rs.) Profit (Rs.)

2021 5,40,000 12,000

2022 6,00,000 30,000



(i) P/V Ratio:

P/V Ratio = (Change in Profit / Change in Sales) × 100

= (30,000 - 12,000) / (6,00,000 - 5,40,000) × 100

= 18,,000 × 100 = 30%



(ii) Fixed Costs:

Contribution (2021) = 5,40,000 × 30% = 1,62,000

Fixed Costs = Contribution - Profit = 1,62,000 - 12,000 = Rs.1,50,000



(iii) Break-Even Sales:

Break-Even Sales = Fixed Costs / P/V Ratio = 1,50,% = Rs.5,00,000



(iv) Margin of Safety at Profit Rs.48,000:

Contribution = Profit + Fixed Costs = 48,000 + 1,50,000 = Rs.1,98,000

Sales = Contribution / P/V Ratio = 1,98,% = Rs.6,60,000

Margin of Safety = Sales - Break-Even Sales = 6,60,000 - 5,00,000 = Rs.1,60,000



(v) Variable Costs:

Variable Cost = Sales - Contribution



2021:

Contribution = 5,40,000 × 30% = Rs.1,62,000

Variable Cost = 5,40,000 - 1,62,000 = Rs.3,78,000