During the first half of the year, the company recorded fixed expenses of 13,50,000, total sales of 45,00,000, and a profit of 9,00,000. However, in…

CA Intermediate · Cost and Management Accounting · MTP · September 2025
During the first half of the year, the company recorded fixed expenses of 13,50,000, total sales of 45,00,000, and a profit of 9,00,000. However, in the second half, the company incurred a loss of 4,50,000. From the information given above, you are required to CALCULATE the following: (i) Profit-volume ratio, break-even point and margin of safety for the first half year. (ii) Expected sales volume for the second half year assuming that selling price and fixed expenses remained unchanged during the second half year.

Suggested Answer and Working Notes:

(i) In the First half year: Contribution = Fixed cost + Profit = 13,50,000 +9,00,000 = 22,50,000 P/V ratio = (Contribution / Sales) × 100 = (₹ 22,50,000 /45,00,000) × 100 = 50% Break-even point = Fixed cost / P/V ratio = 13,50,000 / 50% = 27,00,000 Margin of safety = Actual sales – Break-even point = 45,00,000 - 27,00,000 = 18,00,000 (ii) In the second half year: Contribution = Fixed cost - Loss = 13,50,000 - 4,50,000 = 9,00,000 Expected sales volume = Contribution / P/V ratio = 9,00,000 / 50% = 18,00,000

Topics: Marginal Costing

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