IGNOU SOLVED ASSIGNMENTS: MCO - 05

Particulars	Present Level	Proposed Level
Sales Less: Variable Cost	240000 144000	280000 (240000+40000) 168000(144/240*280000)
Contribution Less: Fixed Cost	96000 26000	112000   30000  (26000 + 4000)
Net Profit Before Tax Less: Tax @40%	70000 28000	82000 32800
Net Profit After Tax	42000	49200

(i) New Break Even Point = (Fixed Costs/Contribution)* Sales

= (30000/112000) * 280000

= 75000

(ii) Sales to earn Present Level of Profit i.e. 70000

Sales = (Fixed Cost + Profit)/ P/V ratio

= (30000 + 70000) / 40%

= 100000 / 40%

= 250000

Here, P/V Ratio = (Contribution / Sales) * 100

 = (112000/280000) * 100

= 40%

(iii) Sales to earn Expected Profit i.e. 80000 (70000 + 10000) on Proposed Investment

Sales = (Fixed Cost + Profit)/ P/V ratio

= (30000 + 80000) / 40%

= 110000 / 40%

= 275000

(iv) Maximum Profit Potential after tax and Plant Expansion

Particulars	Proposed Level
Sales Less: Variable Cost	280000 (240000+40000) 168000(144/240*280000)
Contribution Less: Fixed Cost	112000   30000  (26000 + 4000)
Net Profit Before Tax Less: Tax @40%	82000 32800
Maximum Profit Potential	49200