Marginal costing

Hello friends, I have problem in following question so try to solve it .

A company has P/V ratio of 40%. By what percentage must sales be increased to offset:20% reduction in selling price?

Dear Student,

what Problem you have in Question.

Are you not getting answer.

What is your Calculation Steps and Answer.

Which part is not clarified.

@ shilpa  madam

solution

suppose sales =100 units @ 1 each....................100

(-)contribution (40% of sales................................40

                                               ------------------------------------------------

variable cost..................1....................................60     

when selling price is reduced by 20%

new sales                                                          80

(-)variable cost                                                    60

                                                           ----------------------------

new contribution                                                  20

In order to maintain same level of contribution volume of sales should be (40/20*80)=160..........(step 1)

problem: iam facing problem in step no 1.can you explain me.

Dear Student,

Check Attached File.

Any Further Query, write here.

Dear Student,

Check Attached File.

Any Further Query, write here.

 

Dear Shilpa Maam,

I have a question w.r.t to the above question aswel.

How can the Variable cost be same i.e (Rs. 60). Why not Revised Selling Price * 60% (100% - 40%) - So the revised Variable cost would be Rs.48 (80*60%).

Regards,

Arihant