PQR Ltd is a manufacturing company that operates at 80% capacity, generating a profit of 7,50,000 by selling 36000 units. The cost details are as…

(b) Workings: No. of units at 80% level = 36,000 units.No. of units at 100% level = 36,000 / 80% = 45,000 units.Contribution per unit = 50 Variable cost per unit = Direct Material + Direct wages +Variable cost in semi variable component = (25 + 15 + 10) = 50 per unit Selling Price (SP) = Variable cost per unit + Contribution per unit = 50 +50 = 100 per unit. Calculation of Total fixed cost: = Fixed cost part of semi-variable cost + Fixed overheads = (Total Semi-variable cost at 80% level – Variable cost part) + Fixed Cost (at 80% capacity) = {8,20,000 – (₹ 10 × 36,000 units)} +5,90,000 = 4,60,000 +5,90,000 = 10,50,000 (i) Calculation of Break-even point at 80% Capacity: = Total fixed cost / Contribution per unit = 10,50,000 /50 = 21,000 units (ii) Total Sales Value & Cash BEP at 80% Capacity Total Sales Value = 36,000 units × ₹ 100 = 36,00,000 Now, Cash Fixed Cost = Total Fixed Cost - Depreciation Or Cash Fixed Cost = 10,50,000 -1,90,000 = 8,60,000 Cash BEP (units) = Total cash fixed cost / Contribution per unit = 8,60,000 / 50 = 17,200 units (iii) Capacity utilisation & Margin of safety (MOS) sales to earn a profit of 9,37,500 To earn a profit of 9,37,500, the company must exceed 80% capacity, requiring additional fixed costs. So, New Fixed Cost (>80%) = 10,50,000 +1,50,000 = 12,00,000. Required Units = Fixed cost + Target profit / Contribution per unit = 12,00,000 + 9,37,500 /50 = 42,750 units So, Capacity Utilisation = (42,750 / 45,000) × 100 = 95% New BEP (units) = 12,00,000 /50 = 24,000 units. So, MOS (units) = 42,750 - 24,000 = 18,750 units