Illustration(46,

he competing companies Sun Ltd., and Moon Ltd., produce and sell the same tvpe of
Product in the same market. For the year ended 31st March, 2002 their forecasted profit and
loss accounts are as follows
Sun Ltd. Moon Ltd.
Rs. Rs. Rs. Rs.
Sales 5,00,000
Less Variable Cost
50,00,000
2,75,000 2,50,000
Fixed Cost 75,000 3,50,000 1,00,000 3,50,000
Estimated Profit 1,50,000 1,50,000
You are required to calculate
(a) Profit volume ratio, break-even point and
margin of safety of eacn business.
(b) State sales volume at which each business will earn a
profit of Rs. 75,000.
(c) Explain giving reasons which business is likely to earn greater profits in the
of condiio
(i) Heavy demand for the product.
(ii) Low demand for the product.
 290 MANAGEMENT AccOUNTING
Illustration 46,
The competing companies Sun Ltd., and Moon Ltd, produce and sell the same type of
product in the same market. For the year ended 31st March, 2002 their forecasted profit and
loss accounts are as follows:
Sun Ltd. Moon Ltd.
Rs. Rs. Rs. Rs
5,00,000 50,00,000
Sales 2,50,000
Less Variable Cost 2,75,000
3,50,000 1,00,000 3,50,000
Fixed Cost 75,000
Estimated Profit 1,50,000 150,000
calculate
You are required to business.
volume ratio, break-even point and margin of safety of eacn
(a) Profit nocc uill earn a nrofit of Rs. 75,000.