Question
A company has the following: Sales ₹10,00,000;
Variable cost 60% of sales; Fixed cost ₹1,20,000. Contribution margin = ? Break-even sales = ?Solution
Variable Cost = 60% of 10,00,000 = ₹6,00,000. Contribution = Sales − Variable Cost = 10,00,000 − 6,00,000 = ₹4,00,000. Contribution Margin % = (Contribution / Sales) × 100 = (4,00,000 / 10,00,000) × 100 = 40%. Break-even Sales (in ₹) = Fixed Cost / CM% = 1,20,000 / 0.40 = ₹3,00,000.
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