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