Cost Accounting Formula Verification

This question requires identifying the incorrect formula among standard cost accounting calculations. Let's analyze each option:

Option 1: Margin of Safety Formula

The formula provided is:
$Margin of Safety = $ $\frac{\text{Profit}}{\text{P/V ratio}}$
This is a correct formula to calculate the Margin of Safety in terms of sales value. It represents how much sales can decrease before the company starts incurring losses.

Option 2: P/V Ratio Formula

The formula provided is:
$P/V Ratio = $ $\frac{\text{Change in Contribution}}{\text{Change in sales}} \times 100$
This is also a correct formula. The Profit/Volume (P/V) ratio measures the contribution margin per dollar of sales. Calculating the change reflects how effectively changes in sales translate to changes in contribution.

Option 3: Break-even Point Formula

The formula provided is:
$Break-even point in units = $ $\frac{\text{Fixed cost}}{\text{Contribution per unit}}$
This is the standard and correct formula for calculating the break-even point in units. It determines the number of units that must be sold to cover all fixed costs.

Option 4: Required Sales for Desired Profit Analysis

The formula provided is:
$Required sales to earn desired profits = $ $\frac{\text{Desired profit}}{\text{P/V ratio}}$
This formula is **incorrect**. To achieve a desired profit, sales must cover both fixed costs and the desired profit. The correct formula is:
$Required Sales = $ $\frac{\text{Fixed Costs} + \text{Desired Profit}}{\text{P/V ratio}}$
The given formula omits the crucial 'Fixed Costs' component. Therefore, this statement is not correct.

Conclusion: Option 4 presents an incorrect formula for calculating the required sales to achieve desired profits.