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Answers of MBA104 - FINANCIAL AND MANAGEMENT ACCOUNTING Assignment Question 1- Rainbow Ltd. sold goods for Rs. 30,00,000 in a year. In that year, the variable costs were Rs. 6,00,000 and fixed costs were Rs. 8,00,000. Find out: i) MCSR or P/V Ratio ii) Break-even sales iii) Break-even sales, if the selling price was reduced by 10 % and fixed costs were increased by Rs. 1,00,000.

i) P/V ratio = (S-V)*100
Where, S = Selling price
And V = variable cost
Here, P/V ratio = (3000000-600000)*100

P/V ratio = 80%

ii) P/V ratio = F*100/BEPS
Where, F = fixed cost
80 = 800000*100/BEPS
BEPS = 800000*100/80
BES = 1000000

P/V ratio remains the same as it was, because neither the selling price per unit nor the variable cost per unit changes.
In this case also, P/V ratio = 80%

iii) The selling price per unit decreases by 10%. Consequently, P/V ratio will be changed and now new P/V ratio is to be computed.
New total selling price = 3000000-10% of 3000000 = 2700000
New total fixed cost = 800000+100000 = 900000
New P/V ratio = (S-V)*100
New P/V ratio = (2700000-600000)*100

New P/V ratio = 77.78%

Note: As the number of units produced remains the same and variable cost per unit also remains the same, the total variable cost also remains the same, that is Rs. 600000
We know that at BEP,

P/V ratio = F*100/BEPS
77.78 = (900000*100) BEPS
BEPS = (900000*100)/77.78 = 1157144
New BES = 1157144.

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