The following information is given by PQR Ltd: Year Sales (₹) Profit (Loss (₹) 2022-23 1,80,00,000 (3,80,000) 2023-24 2,40,00,000 11,20,000 You are…

(i) Break-even sales = Fixed Cost / P/V Ratio P/V Ratio = (Change in Profit / Change in Sales) × 100 = (15,00,000 / 60,00,000) × 100 or, 25% Or, = (15,00,000 / (2,40,00,000 - 1,80,00,000)) × 100 or, 25% Fixed Cost = Contribution - Profit = 2,40,00,000 × 25% -11,20,000 = 60,00,000 - 11,20,000 = 48,80,000 Break-even sales = 48,80,000 / 25% = 1,95,20,000 (iii) Desired Contribution in 2024-25 = Revised Fixed Cost + Target Profit = (₹ 48,80,000-4,80,000) +15,00,000 = 59,00,000 Earlier P/V ratio = 25%. So Variable Cost ratio =75%. Selling price remain the same. Variable cost increased by 5% i.e. Variable Cost ratio will be 78.75% (75+5%of 75). Now revised P/V ratio=21.25% Sales Volume in 2024-25 = 59,00,000 / 21.25% = 2,77,64,706(approx.) If it is assumed that variable cost will go up by 5% on total. So, it will be increased from 75% to 80% and solution can be done in following way: (i) Desired Contribution in 2024-25 = Revised Fixed Cost + Target Profit = (48,80,000-4,80,000) +15,00,000 = 59,00,000 Earlier P/V ratio = 25%. So Variable Cost ratio =75%. Selling price remain the same. Variable cost increased by 5% i.e. Variable Cost ratio will be 80% (75%+5%). Now revised P/V ratio=20% Sales Volume in 2024-25 = 59,00,000 / 20% = 2,95,00,000