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:

  1. P/ V ratio.
  2. Break-even sales of each business.
  3. State which business is likely to earn greater profits in conditions of:
  4. heavy demand for the product and
  5. low demand for the product.