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Calculate the change in profit and change in sales.

Business/Management

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Step-by-step solution

5 steps

Here are the calculations based on the provided trading results:

Part i· 2 steps

P/V Ratio.

  1. Calculate the change in profit and change in sales.

    Change in Profit=Profit (2016)−Profit (2017)=Rs. 10,000−Rs. 4,000=Rs. 6,000\text{Change in Profit} = \text{Profit (2016)} - \text{Profit (2017)} = \text{Rs. } 10,000 - \text{Rs. } 4,000 = \text{Rs. } 6,000 Change in Sales=Sales (2016)−Sales (2017)=Rs. 200,000−Rs. 180,000=Rs. 20,000\text{Change in Sales} = \text{Sales (2016)} - \text{Sales (2017)} = \text{Rs. } 200,000 - \text{Rs. } 180,000 = \text{Rs. } 20,000

  2. Apply the P/V Ratio formula.

    P/V Ratio=Change in ProfitChange in Sales×100\text{P/V Ratio} = \frac{\text{Change in Profit}}{\text{Change in Sales}} \times 100 P/V Ratio=6,00020,000×100\text{P/V Ratio} = \frac{6,000}{20,000} \times 100 P/V Ratio=0.3×100=30%\text{P/V Ratio} = 0.3 \times 100 = \boxed{\text{30\%}}

Part ii· 2 steps

Fixed cost.

  1. Calculate the Contribution using sales and P/V Ratio for one year (e.g., 2016).

    Contribution (2016)=Sales (2016)×P/V Ratio\text{Contribution (2016)} = \text{Sales (2016)} \times \text{P/V Ratio} Contribution (2016)=Rs. 200,000×0.30=Rs. 60,000\text{Contribution (2016)} = \text{Rs. } 200,000 \times 0.30 = \text{Rs. } 60,000

  2. Calculate the Fixed Cost using the Contribution and Profit.

    Fixed Cost=Contribution−Profit\text{Fixed Cost} = \text{Contribution} - \text{Profit} Fixed Cost=Rs. 60,000−Rs. 10,000=Rs. 50,000\text{Fixed Cost} = \text{Rs. } 60,000 - \text{Rs. } 10,000 = \boxed{\text{Rs. } 50,000}

Part iii· 1 step

Break Even Point.

  1. Apply the Break Even Point formula using Fixed Cost and P/V Ratio.

    Break Even Point (in Rs.)=Fixed CostP/V Ratio\text{Break Even Point (in Rs.)} = \frac{\text{Fixed Cost}}{\text{P/V Ratio}} Break Even Point (in Rs.)=50,0000.30\text{Break Even Point (in Rs.)} = \frac{50,000}{0.30} Break Even Point (in Rs.)=Rs. 166,666.67\text{Break Even Point (in Rs.)} = \boxed{\text{Rs. } 166,666.67}
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