Two business companies ABC Ltd and PQR Ltd produce and sell the same type of product in the same type of market. Their budgeted P&L A/c for the year ending 31 March 2010 are as follows:
|
Particulars |
ABC Ltd Rs. |
PQR Ltd Rs. |
|
Sales |
4,50,000 |
4,50,000 |
|
Less: Variable cost |
Rs. 3,60,000 |
Rs. 3,00,000 |
|
Fixed cost |
45,000 |
1,05,000 |
|
4,05,000 |
4,05,000 |
|
|
Net budgeted profit |
45,000 |
45,000 |
You are required to compute:
- P/ V ratio.
- Break-even sales of each business.
- State which business is likely to earn greater profits in conditions of:
- heavy demand for the product and
- low demand for the product.