CMA Intermediate · Cost Accounting · Marginal Costing
Sri Lakshmi Foods sells a snack at ₹50 per unit with variable cost of ₹30 per unit. Fixed costs are ₹2,40,000 per annum. What is the break-even sales in rupees?
Break-even sales are ₹6,00,000. The contribution per unit is ₹20 on a price of ₹50, giving a P/V ratio of 40 per cent. Dividing fixed costs of ₹2,40,000 by 40 per cent gives the sales value at which contribution exactly covers fixed costs.
- A₹4,80,000
- B₹6,00,000Correct
- C₹3,00,000
- D₹8,00,000
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 ₹4,80,000 option comes from dividing fixed cost by 50%, a wrong ratio.
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