CMA Intermediate · Management Accounting · Marginal Costing (Management Accounting)
Mehta Plastics sells a product at ₹50 per unit. Variable cost is ₹30 per unit and fixed costs are ₹2,40,000 per year. What is the break-even sales in rupees?
Break-even sales are ₹6,00,000. Contribution per unit is ₹20 on a price of ₹50, giving a P/V ratio of 40%. Dividing fixed costs of ₹2,40,000 by 0.40 gives ₹6,00,000, equal to 12,000 units at ₹50 each.
- A₹4,80,000
- B₹6,00,000Correct
- C₹7,20,000
- D₹3,00,000
Explanation
Contribution per unit = 50 - 30 = ₹20, so P/V ratio = 20/50 = 40%. Break-even sales = 2,40,000 / 0.40 = ₹6,00,000. Check: 12,000 units x ₹50 = ₹6,00,000. The figure ₹4,80,000 comes from dividing fixed cost by 50%, a wrong ratio.
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