The P/v ratio of a company is 50% and margin of safety is 40%. If present sales is Rs 30,00,000 then Break Even Point in Rs will be

Rs 9,00,000
Rs 18,00,000
Rs 5,00,000
None of the above

The correct answer is: B. Rs 18,00,000

The break-even point is the point at which a company’s revenue is equal to its costs. In other words, it is the point at which the company neither makes nor loses money.

The break-even point can be calculated using the following formula:

Break-even point = Fixed costs / Contribution margin

The contribution margin is the amount of revenue that is left over after a company has covered its variable costs. In other words, it is the amount of revenue that is available to cover fixed costs and make a profit.

The P/v ratio is the ratio of a company’s selling price to its variable cost per unit. The margin of safety is the percentage of sales that a company can lose before it reaches its break-even point.

In this case, the P/v ratio is 50% and the margin of safety is 40%. This means that the company’s contribution margin is 60% of its sales.

The fixed costs are not given in the question, but we can calculate them using the following formula:

Fixed costs = Break-even point * Contribution margin

Substituting the values we know into the formula, we get:

Fixed costs = 18,00,000 * 60/100 = Rs 10,800,000

Therefore, the break-even point for the company is Rs 18,00,000.

Option A is incorrect because it is the contribution margin, not the break-even point.

Option C is incorrect because it is the fixed costs, not the break-even point.

Option D is incorrect because it is not one of the possible answers.

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