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Operating Profit Ratio

Given:Contrib...

Question

Given:
Contribution = Rs. 70000
Fixed cost = Rs. 60000
P/V Ratio = 20%
What will be margin of safety________.

A

20000

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B

10000

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C

50000

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D

80000

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Solution

The correct option is C 50000
Margin of safety = $\frac{P r o f i t}{P / V R a t i o}$
= $\frac{10000}{20} \times 100$
= 50000
Profit = Contribution - Fixed Cost
= 70000 - 60000
= 10000.

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