You are required to prepare the Income statement on marginal costing basis from the information provided by XYZ Ltd. for the year ending 31st March 2005 you are also required to calculated the following :-
i) Profit Volume Ratio (P/V Ratio)
ii) Break Even Point (in unit, Rs & %)
iii) Margin of Safety (in units, Rs & %)
From the given information
Normal capacity - 2000 units
Production & Sakes - 2000 units
Selling Price per unit - Rs. 10
Direct Material - Rs. 2,000
Direct Wages - Rs. 2,000
Direct Expenses - • Rs. 1,600
Factory Overheads (15% variable) Rs. 4,000
Office & Admn. Expenses (80% fixed) Rs. 4,000
Selling and Distribution Expenses (75% fised) Rs. 4,000
Calculation of contribution
Calculation of contribution
| 20000 2000 2000 1600 600 800 1000 |
| 12000 |
Sale (2000 x 10)
Less Direct material
Less direct wages
Less direct expense
Less factory overhead (variable)
Less office and admin. Expenses (variable)
Less selling and distribution expense (variable)
Contribution
1. P/V ratio = (Contribution / sale) x 100
= (120007 30000) x 100 = 60%
2. Break even point
In units = Fixed cost / contribution per unit
= 9600/6
= 1600 units
Contribution per unit = 12000/2000 = Rs. 6 per unit
In Rs. = Break even point in units x SP
= 1600x10 =16000
In % = (Break even sale / net sale) x 100
= (1600/2000) x 100 = 80%
3. Margin of safety
| - |
In units = Sale units - margin of safety
= 2000- 1600 = 400
In Rs. = Sale value - margin of safety
= 20000- 16000 = 4000
In % = (Margin of safety / actual sale) x 100
(4007 2000) x 100 = 20%
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