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Magnum company maintains a margin of safety of 25% on its current sales and earns a profit of $ 3 Mn per annum.?

If the Magnum company has a profit volume (P/V) ratio of40%, its current sales amount to

A. $20 mn

B. $30 Mn

C. $32.5 Mn

D. None of the above

Profit Margins Accounting Costing Project Management Management
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Question added by Mohammed Asim Nehal , M Asim Nehal & Co , Chartered Accountants
Date Posted: 2015/08/08
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Md. Moshiur Rahman Sumon
by Md. Moshiur Rahman Sumon , Assistant General Manager( Corporate Finance & Head of Internal Audit) , Progressive Life Insurance Company Limited

Current Sales amount =(Profit*Safety of margin*PV ratio) Mn

                                         =3*25%*40%

                                         =$30 Mn

So B) $30 Mn is correct answer

muhammad nisar
by muhammad nisar , Administration , Federal Directorate of Education

The answer is30 Mn dollars

Ahmer Zamir
by Ahmer Zamir , Consultant , Saleem Associates & Co

The correct option is D) None of the above

 

Current sales =3M/40% =7.5 M

 

Mohammed Asim Nehal
by Mohammed Asim Nehal , M Asim Nehal & Co , Chartered Accountants

Correct answer is $30 mn..................

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