Question
An owner of a business has invested Rs 10,00,000 in
business. He wants a 15% ROI on his money. From an analysis of recent cost figures, he finds that his variable cost of operating is 50% of sales; his fixed costs are ₹ 250,000 per year. You need to calculate the sales volume that must be obtained to break even?Solution
Variable Cost Ratio = 50% P/V Ratio = 1 – Variable Cost Ratio = 1 – 50% = 50% (a) Break Even Point (in ₹) = Fixed Cost / PV Ratio = 250,000 / 50% = 500000
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