Cost accounting

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Querist : Anonymous

Querist : Anonymous (Querist)

02 December 2013 Question 1) given that:
Variable Cost Ratio = 70%
BEP Sales % = 80%
BEP Sales = ?
Your Options Are:
a) 24000
b) 1000000
c) 900000
d) 430000

CA Chandra Kishore Bajpai

CA Chandra Kishore Bajpai (Expert)
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02 December 2013 some information missing in question

Querist : Anonymous

Querist : Anonymous (Querist)

02 December 2013 Sorry Sir but this is full question given in a book.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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20 July 2024 To find the Break-Even Point (BEP) Sales, we need to use the given information:

Variable Cost Ratio = 70%
BEP Sales % = 80%

First, let's understand what each of these represents:
- Variable Cost Ratio: This is the proportion of each sales rupee that goes towards covering variable costs. In this case, it's 70%, meaning for every ₹1 of sales, ₹0.70 is spent on variable costs.
- BEP Sales %: This represents the sales level at which the company breaks even. It's given as 80%, which means the company reaches its break-even point when it achieves 80% of its total sales capacity.

To calculate BEP Sales, we use the formula:
\[ \text{BEP Sales} = \frac{\text{Fixed Costs}}{\text{Contribution Margin Ratio}} \]

Where:
- Contribution Margin Ratio = 1 - Variable Cost Ratio

Since we don't have the Fixed Costs directly provided, we can use the fact that BEP Sales % is 80%, which implies the company reaches BEP when it achieves 80% of its total sales capacity.

Let's calculate BEP Sales using the options provided:

- Option (a): 24000
- Option (b): 1000000
- Option (c): 900000
- Option (d): 430000

We need to choose the option that corresponds to the BEP Sales given the information provided. Since we don't have the exact calculation for Fixed Costs or Contribution Margin Ratio, and we are asked to select an option, let's interpret the question differently.

Given that BEP Sales % is 80%, it seems the options are suggesting different total sales figures at which the company would break even.

If we interpret the question as asking for the total sales required to reach break-even point, then the closest option based on typical BEP Sales calculations might be:

b) 1000000

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