Q2) RS
Subject:AccountingPrice:9.82 Bought3
Q2) RS. Manufacturing Ltd. Budgets production of 3, 00,000 units at a variable cost of Rs. 10 per unit. The
Fixed Costs are Rs.20, 00,000. The selling price is ?xed to yield 20% pro?t on cost. You are required to
calculate:- (i) P/V Ratio (ii) Break Even Production Units
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Q.2-
(i) 50%
(ii) 200,000 units
Step-by-step explanation
Q.2- (i) Budgeted Cost Price Structure Per Unit
| Variable Cost | Rs. 10 |
| Fixed Cost (Rs. 2,000,000 / 300,000 units) | Rs. 6.67 |
| Total Cost | Rs. 16.67 |
| Profit (20% of cost) = (0.20 * 16.67) | Rs. 3.33 |
| Sale Price | Rs. 20 |
Contribution per unit = Sale Price - Variable Cost = 20 - 10 = Rs. 10
The Profit Volume (P/V) Ratio is the measurement of the rate of change of profit due to change in volume of sales.
P/V ratio = (Contribution per unit / Sale Price) * 100%
P/V ratio = (10 / 20) * 100 = 50%
(ii) Break Even Point (in unit) = Total fixed cost / Contribution per unit
Break Even Point (in unit) = 2,000,000 / 10
Break Even Point = 200,000 units
