CMA Intermediate · Cost Accounting · Marginal Costing
For Kaveri Foods, sales are Rs 10,00,000, the P/V ratio is 35% and fixed cost is Rs 2,50,000. What is the total variable cost?
Variable cost is Rs 6,50,000. With a P/V ratio of 35%, contribution is Rs 3,50,000 on sales of Rs 10,00,000, and variable cost is the balance of sales after contribution. Fixed cost does not affect variable cost.
- ARs 3,50,000
- BRs 6,50,000Correct
- CRs 7,50,000
- DRs 4,00,000
Explanation
Contribution = 35% of 10,00,000 = Rs 3,50,000. Variable cost = Sales - Contribution = 10,00,000 - 3,50,000 = Rs 6,50,000. Rs 3,50,000 is the contribution, not the variable cost. Fixed cost is not needed for this answer.
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