M Ltd. has an annual fixed cost of ₹28,50,000. In the year 2024-25, sales amounted to ₹7,80,60,000 as compared with ₹4,80,60,000 in the preceding…

1(c) (i) Break-even sales P/V Ratio = (Change in Profit / Change in Sales) × 100 = (₹37,50,000 / (₹7,80,60,000 - ₹4,80,60,000)) × 100 = (₹37,50,000 / ₹3,00,00,000) × 100 = 12.5% Break-even sales = Fixed Cost / P/V Ratio = ₹28,50,000 / 12.5% = ₹2,28,00,000 (ii) Profit/loss on a forecasted sales volume of ₹12,00,00,000 Profit/loss = Contribution - Fixed Cost = (₹12,00,00,000 × 12.5%) - ₹28,50,000 = ₹1,50,00,000 - ₹28,50,000 = ₹1,21,50,000 (iii) Required sales volume for 2025-26 To earn same amount of profit in 2025-26 as was in 2024-25, it has to earn the same amount of contribution as of 2024-25. Contribution in 2024-25 = Sales in 2024-25 × P/V Ratio in 2024-25 = ₹7,80,60,000 × 12.5% = ₹97,57,500 Let the Selling price be ₹100 in 2024-25, then the Variable cost would be ₹87.5 and Contribution would be ₹12.5. (As Contribution is 12.5%, the Variable cost would be 87.5%.) If there is 10% reduction in Selling price, New Selling Price = ₹90 Variable cost = ₹87.5 So, Contribution = ₹2.5 New Contribution % = (2.5/90) × 100 = 2.77778% Therefore, Sales volume required to earn a profit equals to 2024-25 profit = ₹97,57,500 / 2.77778% = ~₹35,12,69,719.