CA Intermediate · Cost and Management Accounting · Marginal Costing
Mehta Textiles has a P/V ratio of 40% and fixed costs of ₹8,00,000. It wants a profit of ₹4,00,000 after paying a one-time, non-recurring fixed cost of ₹1,00,000 that is not included in the ₹8,00,000. What sales value is required?
Required sales are ₹32,50,000. Total fixed costs are ₹9,00,000 including the one-time cost, and adding the target profit of ₹4,00,000 gives required contribution of ₹13,00,000. Dividing by the 40 percent P/V ratio gives ₹32,50,000.
- A₹30,00,000
- B₹32,50,000Correct
- C₹27,50,000
- D₹33,00,000
Explanation
Total fixed cost to be recovered = 8,00,000 + 1,00,000 = ₹9,00,000. Required contribution = 9,00,000 + 4,00,000 = ₹13,00,000. Sales = 13,00,000 / 0.40 = ₹32,50,000. Ignoring the one-time cost gives ₹12,00,000/0.40 = ₹30,00,000, which is wrong.
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