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Margin of Safety Calculation Example

The company earned a profit of Rs. 30,000 in 2005-06, with a marginal cost of Rs. 8 and a selling price of Rs. 10 per unit, resulting in a profit/volume ratio of 20%. The margin of safety is calculated to be Rs. 1,50,000.

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16 views1 page

Margin of Safety Calculation Example

The company earned a profit of Rs. 30,000 in 2005-06, with a marginal cost of Rs. 8 and a selling price of Rs. 10 per unit, resulting in a profit/volume ratio of 20%. The margin of safety is calculated to be Rs. 1,50,000.

Uploaded by

charleschirwa477
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Problem 5.7 A company earned a profit of Rs. 30,000 during the year 2005-06.

If the marginal cost and


selling price of a product an~ Rs. 8 and Rs. 10 per unit respectively, find out the amount of 'Margin of
Safety'.

Solution

ProfitlVolume Ratio

C 10-8 2 = S = -1-0- = 10 = 20%

Margin of safety

Pr oftt 30,000 PI Vratio 20% = Rs. 1,50,000

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