Given : Margin of Safety ₹ 80,000 Profit ₹ 20,000 Sales ₹ 3,00,000 What is the amount of Fixed Cost ?
Since Profit = Margin of Safety × P/V Ratio, the P/V Ratio = Profit / Margin of Safety = ₹ 20,000 / ₹ 80,000 = 0.25 (or 25%). At Sales of ₹ 3,00,000, Total Contribution =…
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Given : Margin of Safety ₹ 80,000 Profit ₹ 20,000 Sales ₹ 3,00,000 What is the amount of Fixed Cost ?
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Correct answer C
Since Profit = Margin of Safety × P/V Ratio, the P/V Ratio = Profit / Margin of Safety = ₹ 20,000 / ₹ 80,000 = 0.25 (or 25%). At Sales of ₹ 3,00,000, Total Contribution = Sales × P/V Ratio = ₹ 3,00,000 × 25% = ₹ 75,000. Therefore, Fixed Cost = Total Contribution - Profit = ₹ 75,000 - ₹ 20,000 = ₹ 55,000.
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UGC NET Commerce