1. Break-Even Sales at Present:
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[ \text{Break-Even Sales} = \frac{\text{Fixed Costs}}{\text{Contribution Margin Ratio}} ]
Given that:
- Profit = Rs. 1,80,000
- Sales = Rs. 30,00,000
- Variable Expenses = Rs. 21,00,000
[ \text{Contribution Margin Ratio} = \frac{\text{Contribution}}{\text{Sales}} ]
[ \text{Contribution} = \text{Sales} – \text{Variable Expenses} ]
[ \text{Fixed Costs} = \text{Sales} – \text{Variable Expenses} – \text{Profit} ]
Calculate Contribution Margin Ratio and then use the formula to find Break-Even Sales.
2. Break-Even Sales if Variable Cost Increased by 5%:
[ \text{Break-Even Sales (new)} = \frac{\text{Fixed Costs}}{\text{Contribution Margin Ratio (new)}} ]
With a 5% increase in variable costs:
[ \text{Variable Expenses (new)} = \text{Variable Expenses} + 0.05 \times \text{Variable Expenses} ]
[ \text{Contribution (new)} = \text{Sales} – \text{Variable Expenses (new)} ]
[ \text{Contribution Margin Ratio (new)} = \frac{\text{Contribution (new)}}{\text{Sales}} ]
Now, use the formula to find Break-Even Sales with the increased variable costs.
3. Break-Even Sales to Maintain the Profit with a 6% Reduction in Selling Price:
[ \text{Break-Even Sales (reduced price)} = \frac{\text{Fixed Costs}}{\text{Contribution Margin Ratio (reduced price)}} ]
With a 6% reduction in selling price:
[ \text{Sales (reduced price)} = \text{Sales} – 0.06 \times \text{Sales} ]
[ \text{Contribution (reduced price)} = \text{Sales (reduced price)} – \text{Variable Expenses} ]
[ \text{Contribution Margin Ratio (reduced price)} = \frac{\text{Contribution (reduced price)}}{\text{Sales (reduced price)}} ]
Now, use the formula to find Break-Even Sales with the reduced selling price to maintain the profit as at present.
Note: Ensure to use consistent units for all calculations (e.g., lakhs or rupees).