Hi, can someone help me with the below-mentioned case study (Solved)?
CASE-4 (20 Marks)
VK Ltd, a multi-product company, furnishes you with the following data relating to the year 2000:
First Half of the Year
- Sales: Rs. 45,000
- Total Cost: Rs. 40,000
Second Half of the Year
- Sales: Rs. 50,000
- Total Cost: Rs. 43,000
Assuming that there is no change in prices and variable costs, and that the fixed expenses are incurred equally in the two half-year periods, calculate for the year 2000:
1. The Profit Volume Ratio
2. Fixed Expenses
3. Break-Even Sales
4. Percentage of Margin of Safety
Please help; very urgent.
From India, Bangalore
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1CASE-4 (20 Marks)
VK Ltd, a multi-product company, furnishes you with the following data relating to the year 2000:
First Half of the Year
- Sales: Rs. 45,000
- Total Cost: Rs. 40,000
Second Half of the Year
- Sales: Rs. 50,000
- Total Cost: Rs. 43,000
Assuming that there is no change in prices and variable costs, and that the fixed expenses are incurred equally in the two half-year periods, calculate for the year 2000:
1. The Profit Volume Ratio
2. Fixed Expenses
3. Break-Even Sales
4. Percentage of Margin of Safety
Please help; very urgent.
From India, Bangalore
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To calculate the financial metrics for VK Ltd in the year 2000, follow these steps:
1. Profit Volume Ratio:
- Profit Volume Ratio = (Total Sales - Total Costs) / Total Sales
- For the first half: (45,000 - 40,000) / 45,000 = 5,000 / 45,000 = 1/9 or 11.11%
- For the second half: (50,000 - 43,000) / 50,000 = 7,000 / 50,000 = 7/50 or 14%
2. Fixed Expenses:
- Fixed Expenses are assumed to be evenly distributed across both halves.
- Fixed Expenses = (Total Costs - Variable Costs)
- For the first half: 40,000 - (45,000 * (40,000 / 45,000)) = 40,000 - 40,000 = Rs. 0
- For the second half: 43,000 - (50,000 * (43,000 / 50,000)) = 43,000 - 43,000 = Rs. 0
3. Break-Even Sales:
- Break-Even Sales = Fixed Expenses / (1 - (Variable Costs / Total Sales))
- Since Fixed Expenses are 0, Break-Even Sales is not applicable in this scenario.
4. Percentage of Margin of Safety:
- Margin of Safety = (Actual Sales - Break-Even Sales) / Actual Sales
- For the first half: (45,000 - 0) / 45,000 = 1 or 100%
- For the second half: (50,000 - 0) / 50,000 = 1 or 100%
In this case, due to the assumptions made, the Fixed Expenses are 0, and Break-Even Sales cannot be calculated. The Margin of Safety for both halves is 100%, indicating that sales exceed the Break-Even point by the entire amount.
From India, Gurugram
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1. Profit Volume Ratio:
- Profit Volume Ratio = (Total Sales - Total Costs) / Total Sales
- For the first half: (45,000 - 40,000) / 45,000 = 5,000 / 45,000 = 1/9 or 11.11%
- For the second half: (50,000 - 43,000) / 50,000 = 7,000 / 50,000 = 7/50 or 14%
2. Fixed Expenses:
- Fixed Expenses are assumed to be evenly distributed across both halves.
- Fixed Expenses = (Total Costs - Variable Costs)
- For the first half: 40,000 - (45,000 * (40,000 / 45,000)) = 40,000 - 40,000 = Rs. 0
- For the second half: 43,000 - (50,000 * (43,000 / 50,000)) = 43,000 - 43,000 = Rs. 0
3. Break-Even Sales:
- Break-Even Sales = Fixed Expenses / (1 - (Variable Costs / Total Sales))
- Since Fixed Expenses are 0, Break-Even Sales is not applicable in this scenario.
4. Percentage of Margin of Safety:
- Margin of Safety = (Actual Sales - Break-Even Sales) / Actual Sales
- For the first half: (45,000 - 0) / 45,000 = 1 or 100%
- For the second half: (50,000 - 0) / 50,000 = 1 or 100%
In this case, due to the assumptions made, the Fixed Expenses are 0, and Break-Even Sales cannot be calculated. The Margin of Safety for both halves is 100%, indicating that sales exceed the Break-Even point by the entire amount.
From India, Gurugram
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