Question

Fast Rite Ltd. manufactures a variety of stationery but its most popular product is its pen. Three varieties of pens to suit the need of its users.

The details of the pens are given in the table below.

Variety	Classic Gel Pen	Executive Ball Pen	Four-in-one Ball Pen
Selling Price per unit (in rupees)	15	21	36
Variable cost per unit (in Rupees) 9	9	14	19
Sales Mix	20%	20%	60%

The total fixed cost is Rs. 2,56,000.

Calculate the following from the information given above.

1. Total weighted average contribution margin
2. Breakeven Quantity for each variety
3. Break even (in Rupees) for Four-in-one Ball Pen

Answer 1

Variety	Classic Gel Pen	Executive Ball Pen	Four-in-one Ball Pen
Selling Price per unit (in rupees)	15	21	36
Variable cost per unit (in Rupees) 9	9	14	19
(C) Contribution A-B (in Rupees)	6	7	17
(D) Sales Mix	20%	20%	60%
Weighted contribution (C× D)	6	7	17
	1.2	1.4	10.2

(i) Total weighted average contribution margin= Rs.12.8 (1.2 + 1.4 + 10.2)

(ii) Breakeven Quantity for each variety

BEP = `"Total Fixed cost"/"Total weighted contribution"`

`= 256000/12.8`

= 20,000 units

BEP for Individual

Classic Gel Pen	Executive Ball Pen	Four-in-one Ball Pen
20000 × 20% = 4000 units	20000 × 20% = 4000 units	20000 × 60% = 12,000 units

(iii) Break even (in Rupees) for Four-in-one Ball Pen

= Break-even quantity × selling price/ball pen

= 20,000 × Rs. 36

= Rs. 72,000