PLzz Anyone can help me out???
How P/V Ratio = Profit / Margin of Safety ???
7 Replies
CS RAJESH C.CHOUDHARY
(ASSISTANT MANAGER)
(14607 Points)
Replied 23 November 2011
Let Sale be 3,00,000 , Variable cost be 240,000 Contribution will be 60,000( sale - Vcost)
Now BES be 40% of Actual sale that comes to 1,20,000 and cont come to 24,000 ( sale * P/v ratio)
MOS will be 60 % of Actual sale that comes to 180,000 and cont comes to 36,000( sale * p/v ratio)
and fixed cost in MOS is always 0 and rest of all is profit that is 36,000.
Profit =36,000
and Profit/MOS = 36000/180,000
=20% which is equal to P/v Ratio.
It's easy just make a table and follow the formula you will come to know okey .
All the Best
Mary Asha
(Chartered Accountant)
(112 Points)
Replied 23 November 2011
Margin of safety(value) = Profit/PV ratio..
PV ratio = profit/(profit/PV ratio)
Profit gets cancel.. Hence left out is PV ratio...
CA PRAVEEN SINGH
(MANAGER ACCOUNTS)
(2277 Points)
Replied 23 November 2011
SALES ....................
LESS. VARIABLE COST .......................
CONTRIBUTION............................
LESS FIXED COST.................................
PROFIT ...............................
P/V RATIO=-CONTRIBUTION *100/SALES
MARGIN OF SAFETY= ACTUL SALES - BEP SALES.
yogeshwar malhotra
(partner)
(112 Points)
Replied 25 November 2011
1.MARGIN OF SAFETY = ACTUAL SALES - BREAK EVEN SALES
2. MARGIN OF SAFETY = ACTUAL SALES - FIXED COST / PV RATIO
3. M/S = ACTUAL SALES * PV RATIO - FIXED COST
---------------------------------------------------------- { BY RULE OF LCM}
PV RATIO
4. M/S * PV RATIO = ( ACTUAL SALES * PVR ) - FIXED COST
5. M/S *PV RATIO= CONTRIBUTION- FIXED COST
6. PV RATIO= PROFIT / MS
yogeshwar malhotra
(partner)
(112 Points)
Replied 25 November 2011
C V P CHAPTER IS THE EASIEST ONE .
yogeshwar malhotra
(partner)
(112 Points)
Replied 25 November 2011
VAISE TOH , THE FORMULA FOR M/S IS ALSO = PROFIT /PVR
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