Sales Rs. 25,000; Variable cost Rs. 8,000; Fixed cost Rs. 5,000; Break-even sales in value .a.Rs. 8,333.b.Rs. 7,936.c.Rs. 9,090.d.Rs. 7,353.
Question
Sales Rs. 25,000; Variable cost Rs. 8,000; Fixed cost Rs. 5,000; Break-even sales in value .a.Rs. 8,333.b.Rs. 7,936.c.Rs. 9,090.d.Rs. 7,353.
Solution
To calculate the break-even sales in value, we first need to calculate the contribution margin ratio. The contribution margin ratio is calculated as (Sales - Variable Costs) / Sales.
Step 1: Calculate the Contribution Margin Ratio = (Sales - Variable Costs) / Sales = (25,000 - 8,000) / 25,000 = 17,000 / 25,000 = 0.68 (or 68%)
Step 2: Calculate the Break-Even Sales in Value = Fixed Costs / Contribution Margin Ratio = 5,000 / 0.68 = Rs. 7,353
So, the correct answer is d. Rs. 7,353.
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