% capacity

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236 Points Joined August 2016

A plant operates at 60% capacity
the fixed costs are 30000, variable=100000
sales are 150000rs
% capacity of plant to earn profit of 40000??

Replies (1)

Guest

Contribution ratio: 50,000/1,50,000 = 1/3.

Contribution required: 40,000 (profit) + 30,000 (fixed cost) = 70,000

Total sales required: Contribution / Contribution ratio = 70,000 x 3 = 2,10,000.

% capacity:

60/1,50,000 x 2,10,000 = 84%.

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