CA Inter P4 · Chapter 13 · Question 3 of 10
With break-even sales of ₹30,00,000 and a P/V ratio of 36%, actual sales for the year are ₹40,00,000. The profit for the year is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ₹3,60,000
Explanation
Margin of safety = actual sales - break-even sales = ₹40,00,000 - ₹30,00,000 = ₹10,00,000. Profit = margin of safety x P/V ratio = ₹10,00,000 x 36% = ₹3,60,000. Check: contribution ₹14,40,000 - fixed costs ₹10,80,000 = ₹3,60,000.
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