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    Question

    Refer to the following information to answer the next 4 questions (Q5 to Q8) Deepak Ltd produces and sells two products – shirts and trousers. The details of the 2 products are as under: Product T-Shirt Shirt Sales price per unit Rs.800 Rs.1400 Variable Cost per unit Rs.380 Rs.420 Deepak Ltd’s fixed costs are Rs.43,89,000 per period.

    If the budgeted sales revenue is Rs.74,40,000 in the above product mix, what will be the margin of safety?

    A Rs.30,51,000 Correct Answer Incorrect Answer
    B Rs.24,31,000 Correct Answer Incorrect Answer
    C Rs.12,42,000 Correct Answer Incorrect Answer
    D Rs.6,20,000 Correct Answer Incorrect Answer
    E Rs.3,15,000 Correct Answer Incorrect Answer

    Solution

    Margin of safety = sales – break even sales Here Sales is represented by budgeted sales of Rs.74,40,000 Break even sales = break even sales of t-shirts + break even sales of shirts = (2750*8) + (3300*14) = Rs.68,20,000 Margin of safety = Rs.74,40,000 – Rs.68,20,000 = Rs.6,20,000

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