CA Intermediate · Cost and Management Accounting · Marginal Costing
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 profit of ₹2,40,000?
Units needed equal (fixed cost plus target profit) divided by contribution per unit. Contribution per unit is 40% of ₹120, i.e. ₹48. Required contribution is ₹12,00,000, so 25,000 units must be sold to earn the profit of ₹2,40,000.
- A20,000 units
- B25,000 unitsCorrect
- C30,000 units
- D12,500 units
Explanation
Contribution per unit = 40% x 120 = ₹48. Required contribution = fixed cost + profit = 9,60,000 + 2,40,000 = ₹12,00,000. Units = 12,00,000 / 48 = 25,000. Distractor 20,000 is the break-even units (profit ignored). Check: 25,000 x 48 = 12,00,000 less 9,60,000 = 2,40,000.
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
- Rohan Appliances has sales of Rs 10,00,000, variable costs of Rs 6,00,000 and fixed costs of Rs 2,00,000. Management plans to cut the sellin…
- Which statement about marginal costing is correct under standard ICAI treatment?
- Anand Foods makes one product selling at Rs 80 with variable cost Rs 50 per unit. Fixed costs are Rs 6,00,000. It wants a profit of Rs 3,00,…
- Sundaram Foods makes two products. Product P sells at Rs 100 with variable cost Rs 60; product Q sells at Rs 50 with variable cost Rs 35. Sa…
- In marginal costing, which of the following is treated as a period cost and is charged in full to the Profit and Loss account of the period?
- Sundaram Appliances sells two products. Product A: selling price Rs 100, variable cost Rs 60, sales mix 3 units. Product B: selling price Rs…