Contribution margin to sales ratio is 84% for the ABC Co. and the breakeven point in sales is Rs. 150,000. The company desires a target net income of Rs. 42,000.
Required:
What will be value of Fixed Cost?
What will be target contribution margin?
What would be the amount of actual sales?
What will be value of Fixed Cost?
What will be target contribution margin?
What would be the amount of actual sales?
Solution:-
here its idea solution.....please comment am right or wrong....
Part 1)
BEP Sales = Fixed/Contribution margin ratio
150000 = Fixed /84%
150000 = Fixed /0.84
Fixed = 150000 x 0.84
Fixed = 126000
Part 2)
Target contribution = Target profit + Fixed cost
Target contribution = 42000 + 126000
Target contribution = 168000
Part 3)
Contribution margin ration = Contribution margin / sales
0.84 = 168000/sales
Sales = 168000/0.84
Sales = 200000
Sales 200000
Less: Variable (3200)
Contribution margin 168000
Less: Fixed Cost (126000)
Profit 42000
Part 1)
BEP Sales = Fixed/Contribution margin ratio
150000 = Fixed /84%
150000 = Fixed /0.84
Fixed = 150000 x 0.84
Fixed = 126000
Part 2)
Target contribution = Target profit + Fixed cost
Target contribution = 42000 + 126000
Target contribution = 168000
Part 3)
Contribution margin ration = Contribution margin / sales
0.84 = 168000/sales
Sales = 168000/0.84
Sales = 200000
Sales 200000
Less: Variable (3200)
Contribution margin 168000
Less: Fixed Cost (126000)
Profit 42000
Please do make changes in these assignment otherwise every one who copy this assignment as it is will awarded zero marks
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