Question

Anju Pvt. Provides following information:
Rs.
Fixed cost = 90,000
Sales = 3,00,000
Profit = 60,000
What is the margin of safety of the company?

• A. Rs.60,000
• B. Rs 1,20,000
• C. Rs. 1,60,000
• D. Rs. 2,40,000

Answer 1

The correct option is B Rs 1,20,000

Margin of safety = $\frac{Profit}{P/VRatio}$
= $\frac{60,000}{50}$
= $\frac{60,000\times 100}{50}$
= Rs.1,20,000
P/V Ratio = $\frac{F+P}{S}\times 100$
= $\frac{90,000+60,000}{3,00,000}\times 100$
= 50%.