CA Intermediate · Cost and Management Accounting · Marginal Costing
Meera Textiles makes a single product. Sales are Rs 12,00,000, variable costs are Rs 7,20,000 and fixed costs are Rs 3,00,000. If the selling price per unit falls by 10% while variable cost per unit and volume remain unchanged, what is the new profit-volume (P/V) ratio?
The new P/V ratio is 33.33%. After a 10% price cut, sales fall to Rs 10,80,000 while variable cost stays Rs 7,20,000, leaving contribution of Rs 3,60,000. Dividing contribution by the new sales gives one third, not the old base.
- A40.00%
- B33.33%Correct
- C30.00%
- D25.00%
Explanation
Original sales Rs 12,00,000; after 10% fall sales = 10,80,000. Variable cost stays 7,20,000, so contribution = 3,60,000. P/V ratio = 3,60,000 / 10,80,000 = 33.33%. The 30% option wrongly divides the new contribution by the old sales of 12,00,000.
Did you get it right without looking?
One question tells you little. A timed set on Marginal Costing shows your real accuracy, how long you take and where you lose marks.
More Marginal Costing questions
- Which statement about marginal costing is correct when production exceeds sales during a period and opening stock is nil?
- Dhruv Appliances produced 12,000 units and sold 10,000 units in a year. Selling price is Rs 100 per unit, variable cost is Rs 60 per unit an…
- Kaveri Plastics makes a single product. The selling price is ₹80 per unit, variable cost is ₹52 per unit and fixed cost is ₹5,60,000 per yea…
- Mehta Foods sells a product at ₹120 per unit with a P/V ratio of 40%. Fixed costs are ₹9,60,000. How many units must be sold to earn a profi…
- Which one of the following costs is treated as a period cost and is therefore excluded from the valuation of closing stock under marginal co…
- A company's sales are ₹10,00,000, variable costs are ₹6,00,000 and fixed costs are ₹2,50,000. If sales volume rises by 10% with no change in…