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    Question

    A company has Fixed Costs of ₹2,00,000, a contribution

    margin ratio (P/V ratio) of 25%, and it achieved total sales of ₹10,00,000. Calculate the profit earned and Margin of Safety, is it comfortable.
    A Profit = ₹2,50,000; MoS = ₹2,50,000= High Correct Answer Incorrect Answer
    B Profit = ₹1,50,000; MoS = ₹50,000 = Low Correct Answer Incorrect Answer
    C Profit = ₹2,00,000; MoS = ₹1,00,000 = Medium Correct Answer Incorrect Answer
    D Profit = ₹50,000; MoS = ₹2,00,000 = Moderate Correct Answer Incorrect Answer
    E Profit = ₹4,00,000; MoS = ₹2,50,000 = High Correct Answer Incorrect Answer

    Solution

    Contribution = Sales × P/V = ₹10,00,000 × 25% = ₹2,50,000 Profit = Contribution – Fixed Cost = ₹2,50,000 – ₹2,00,000 = ₹50,000 BEP Sales = Fixed Cost / P/V = ₹2,00,000 / 0.25 = ₹8,00,000 MoS = ₹10,00,000 – ₹8,00,000 = ₹2,00,000 → 20% of sales → Moderate

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