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Tuesday, March 18, 2014

IGNOU SOLVED ASSIGNMENTS: MCO - 05



Particulars
Present Level
Proposed Level
Sales
Less: Variable Cost
240000
144000
280000 (240000+40000)
168000(144/240*280000)
Contribution
Less: Fixed Cost
96000
26000
112000
  30000  (26000 + 4000)
Net Profit Before Tax
Less: Tax @40%
70000
28000
82000
32800
Net Profit After Tax
42000
49200


(i) New Break Even Point = (Fixed Costs/Contribution)* Sales

= (30000/112000) * 280000

= 75000


(ii) Sales to earn Present Level of Profit i.e. 70000

Sales = (Fixed Cost + Profit)/ P/V ratio

= (30000 + 70000) / 40%

= 100000 / 40%

= 250000

Here, P/V Ratio = (Contribution / Sales) * 100

 = (112000/280000) * 100

= 40%

(iii) Sales to earn Expected Profit i.e. 80000 (70000 + 10000) on Proposed Investment

Sales = (Fixed Cost + Profit)/ P/V ratio

= (30000 + 80000) / 40%

= 110000 / 40%

= 275000

(iv) Maximum Profit Potential after tax and Plant Expansion

Particulars
Proposed Level
Sales
Less: Variable Cost
280000 (240000+40000)
168000(144/240*280000)
Contribution
Less: Fixed Cost
112000
  30000  (26000 + 4000)
Net Profit Before Tax
Less: Tax @40%
82000
32800
Maximum Profit Potential
49200