SHALINI

ASSISTANT PROFESSOR ( GUEST FACULTY )

VANIJYA MAHAVIDYALAYA

PATNA UNIVERSITY, PATNA

CONTACT: 7903953783
EMAIL: shalinigalax@gmail.com

E-CONTENT FOR M.COM (SEMESTER-2)

SUBJECT: MANAGEMENT ACCOUNTING
PAPER CODE: COMCC-9
UNIT-IV : BREAK EVEN ANALYSIS ( NUMERICALS)
TOPIC: PRACTICAL PROBLEMS BASED ON M.O.S. AND B.E.P.
PART 2

NOTE: Theoretical part of this chapter has already been discussed

in the class with dictation.
VARIOUS ASPECTS OF CVP ANALYSIS:
There are various aspects of cost-volume-profit analysis (CVP) :-
1) Contribution
Sales – variable cost= Contribution
Fixed Cost + Profit = Contribution
Therefore, Sales – Variable cost= Fixed cost + Profit

2) Profit Volume Ratio or P/V Ratio – It is the measurement of

the rate of change of profit due to change in volume of sales.
P/V Ratio=
 Contribution or
Sales
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 Sales – Variable Cost or
Sales
Fixed Cost +Profit
Sales

 1 - Variable Cost
Sales
 Fixed Cost (₹) where, B.E.P(₹) =B.E.P (u) x Sales( p. u. )
B.E.P (₹)
 Profit
M.O.S.
 If both profit and sales are given for two years, P/V ratio will
be calculated as
Change in Profit x 100
Change in Sales
3) Margin of Safety (M.O.S.) – It is the difference between actual
sales and B.E.P. sales and may be calculated in (₹), units or even
in % form.
 M.O.S = Actual sales - B.E.P. sales
where, B.E.P. sales = Fixed cost
P/V Ratio
 M.O.S. = Actual sales x M.O.S. ratio
where, M.O.S. Ratio = Margin of safety
Actual sales
 M.O.S. (₹) = Profit

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 P/V Ratio

QUESTION:
Belly Furniture House before provided following trading
results:
Year Units Total Cost ₹ Sales₹
2010 10000 80000 100000
2011 12000 90000 120000
Find M.O.S. and profit on the basis of M.O.S. for the year
2010 and 2011.
Solution:
Year Total Cost ₹ Sales₹ Profit₹
2010 80000 100000 20000
2011 90000 120000 30000
M.O.S. = Actual Sales – B.E.P Sales
B.E.P (₹)= Fixed Cost
P/V Ratio
P/V Ratio = Change in profit X 100
Change in sales
Change in Profit = 30,000-20000 = ₹10,000
Change in Sales = 1,20,000-1,00,000 = ₹20,000

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P/V Ratio= 10000 x 100= 50 %
20000
To find out Fixed Cost,
P/V Ratio = F.C. +Profit
Sales
In 2010,
F.C = 100000 X 50% - 20000 = ₹30000
B.E.P Sales = F.C = 30000 X100 = ₹60,000
P/V Ratio 50

Calculation of M.O.S-
M.O.S.= Actual Sales – B.E.P. Sales
= 100000-60000= ₹40,0000 OR
M.O.S. = Profit = 20000 X 100 = ₹40,000
P/V 50
Calculation of profit on the basis of M.O.S. –
M.O.S. X P/V Ratio
In 2010, 40000 X 50% = ₹20000
Similarly,
In 2011,
Fixed cost and B.E.P sales remain same in both year.

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Calculation of M.O.S.= Actual sales- B.E.P. Sales
=120000-60000 = ₹60000 OR
M.O.S. = Profit
P/V Ratio
= 30000 X 100 =₹ 60000
50
Calculation of profit on the basis of M.O.S.-
M.O.S. X P/V Ratio = 60000 X 50% = ₹30000.
4) Break Even Analysis –
It is the study of revenue and costs in relation to sales volume
of a business unit and to determine that point where both cost
and revenue are in equilibrium. Break even point is a point of
activity where producer neither earns any profit nor incurs any
loss. Formulae:
 B.E.P. (u) = B.E.P. (₹)
Sales (p .u.)
 B.E.P. (₹) = B.E.P. (units) X Sales Price (p .u.)
 B.E.P.(units) = Fixed Cost
Contribution(p .u.)
 B.E.P. (₹) = B.E.P.( units) x Sales Price (p .u)
 B.E.P. (₹) = Fixed Cost (₹)
P/V Ratio

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QUESTIONS:
Ques.1. Find B.E.P. in ₹ and in units from the following
information-
Sales @ ₹ 25 p. u.
Variable Cost @₹ 15 p. u.
Fixed Cost ₹30000
Produced Units 1200 units.
Solution:
a) B.E.P. (u) = Fixed Cost ₹
Sales- Variable
= 30000 = 3000 units
25-15
b) B.E.P. (₹) = B.E.P (u) X Sales Price p. u.
= 3000 units X 25₹ p. u
= ₹ 75000
Ques 2. The following data are obtained from the records of Y ltd.
1st Year 2nd Year
Sales 80,000 90,000
Profit 10,000 14,000
Calculate B.E.P in ₹.
Solution.
B.E.P (₹) = Fixed Cost
P/V Ratio

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P/V Ratio = Change in Profit X 100
Change in Sales
= 4,000 X 100 = 40%
10,000
P/V Ratio = Fixed cost + Profit
Sales
40 = F.C + 10,000
100 80,000
F.C = ₹ 22,000
B.E.P. (₹) =22,000 X 100 = ₹55000
40
Ques.3. Calculate B.E.P. ₹ on the basis of given following
information.
₹ ₹
Sales 500000
- V.C. 400000 100000
- F.C. (50000)
Profit 50,000
Solution.
B.E.P. ₹ = Fixed Cost X 100
Contribution
= 50000 X 100 = ₹ 250000
100000

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 Ques. 4. The following data related to Ashoka ltd. For the
year 2019-
Material 15 p .u.
Labour 7.5 p. u.
Variable Overhead 3 p. u.
Selling Price 30 p .u.
Fixed Cost ₹ 1350
Number of units sold during the year 1500
Find out BEP ₹ and Break Even Ratio (BE Ratio).
Solution:
a) BEP ₹ = Fixed cost X SP
SP- VC
= 1350 X 30 = ₹ 9000
30 - 25.5
b)B.E. Ratio = B.E.P ₹ X 100
Actual Sales
Actual Sales = Number of Units X Selling Price p .u.
= 1500 X 30 = ₹ 45000
B.E. Ratio = 9000 X 100 = ₹ 20%
45000

Break Even Ratio – It is a ratio between break even sales and actual
sales made by business concern.

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 B.E. Ratio = B.E.P (₹)
Actual sales
Ques. 5. You are requested to report to Top Management of ABC
Co. the point of sales in terms of ₹ volume to break even. For the
purpose, you are provided:
i) Fixed overhead remain constant at ₹ 12000
ii) Variable cost will rise from zero to ₹12000
iii) Selling Price is ₹ 600 per ton.
iv) The tonnage produced and sold 30 ton.
Solution.
According to question we are asked to calculate B.E.P. ₹.
B.E.P.₹ = Fixed Cost X SP p .u.
SP( p .u ) - VC(p . u.)
Here, variable cost per unit is not given directly. So,
Variable cost p .u = Total Variable cost
No. of units Produced
= 12000 = ₹ 400 p. u
30
B.E.P.₹ = 12000 X 600 = ₹ 36000.
600-400
Note: All the above questions are based on basic concepts
and formulae . (Easy )

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