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    Question

    A company reports total sales of ₹6,00,000 and earns a

    contribution of ₹2,40,000. Its Margin of Safety is ₹1,50,000. Based on this information, determine the fixed cost of the company.
    A ₹90,000 Correct Answer Incorrect Answer
    B ₹1,00,000 Correct Answer Incorrect Answer
    C ₹1,20,000 Correct Answer Incorrect Answer
    D ₹1,40,000 Correct Answer Incorrect Answer
    E ₹1,80,000 Correct Answer Incorrect Answer

    Solution

    P/V Ratio = Sales/Contribution ​= 6,00,000/2,40,000 ​= 40%   Profit = PV Ratio * Margin of Safety ​= 40% x 1,50,000 ​= 60,000   Contribution = Fixed cost + Profit Or, Fixed cost = Contribution – Profit =  2,40,000 – 60,000 = Rs.1,80,000

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