otal sales Rs. 20,00,000; Fixed expenses Rs. 4,00,000; P/V Ratio 40%; Break-even capacity in percentage is .a.50% .b.40% .c.45%.d.60%
Question
Solution
To calculate the Break-even capacity in percentage, we first need to calculate the Break-even point in terms of sales.
The formula for Break-even point in terms of sales is:
Break-even point (Sales) = Fixed Expenses / P/V Ratio
Given, Fixed Expenses = Rs. 4,00,000 and P/V Ratio = 40% or 0.40
So, Break-even point (Sales) = Rs. 4,00,000 / 0.40 = Rs. 10,00,000
Now, to calculate the Break-even capacity in percentage, we use the formula:
Break-even capacity (%) = (Break-even point (Sales) / Total Sales) * 100%
Given, Total Sales = Rs. 20,00,000
So, Break-even capacity (%) = (Rs. 10,00,000 / Rs. 20,00,000) * 100% = 50%
Therefore, the Break-even capacity in percentage is 50%. So, the answer is .a.50%
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