Total sales Rs. 20,00,000; Fixed expenses Rs. 4,00,000; P/V Ratio 40%; Break-even capacity in percentage is .a.45%.b.50% .c.60% .d.40%
Question
Total sales Rs. 20,00,000; Fixed expenses Rs. 4,00,000; P/V Ratio 40%; Break-even capacity in percentage is .a.45%.b.50% .c.60% .d.40%
Solution
To find the break-even capacity in percentage, we first need to calculate the break-even point in terms of sales. The formula for the break-even point in sales is Fixed Expenses / Contribution Margin Ratio.
Here, the Contribution Margin Ratio (P/V Ratio) is given as 40% or 0.40.
So, the break-even point in sales = Fixed Expenses / Contribution Margin Ratio = Rs. 4,00,000 / 0.40 = Rs. 10,00,000
Now, to find the break-even capacity in percentage, we divide the break-even point in sales by the total sales and multiply by 100.
Break-even capacity in percentage = (Break-even point in sales / Total Sales) * 100 = (Rs. 10,00,000 / Rs. 20,00,000) * 100 = 50%
So, the break-even capacity in percentage is 50%. Therefore, the correct option is b. 50%.
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