two business companies abc ltd and pqr ltd produce and sell the same type of product 609579

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

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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.
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