Question

‘Royal Fruit Juice Ltd.’ are the manufacturers of different types of fruit juices. They do not use any artificial flavours in their products. The fixed cost of the production process is ₹ 1,76,000. Given below is information about Mango, Orange and Guava fruit juices.

Type of Juice →	Mango (Per Litre)	Orange (Per Litre)	Guava (Per Litre)
Selling Price (₹)	150	135	100
Variable Cost (₹)	80	65	60
Sales Mix Percentage	20%	40%	40%

From the above data, calculate the following:

1. Total weighted average contribution margin per unit.
2. Break-even point in units of sales mix.
3. Break-even point (in ₹) for each type of juice.

Answer 1

Step 1: Contribution Margin Per Unit

CM = Selling Price – Variable Cost

Mango: 150 – 80 = 70

Orange: 135 – 65 = 70

Guava: 100 – 60 = 40

Step 2: Total Weighted Average Contribution Margin per Unit

Weighted CM = (CM_Mango × Sales Mix_Mango) + (CM_orange × Sales Mix_orange) + (CM_Guava × Sales Mix_Guava)

= (70 × 0.2) + (70 × 0.4) + (40 × 0.4)

= 14 + 28 + 16 

= 58

Thus, the weighted average contribution margin per unit is 58.

Step 3: Break-Even Point in Units of Sales Mix Break-Even Point (BEP) in units is calculated as:

BEP (units) = `"Fixed Cost"/"Weighted CM per unit"`

`= 176000/58`

= 3,034.4

≈ 3,035 units

Thus, the break-even point in units of sales mix is 3,035 units.

Step 4: Break-Even Sales in ₹ for Each Juice

Break-Even sales for each juice type are:

BEP for Juice = BEP (Units) × Sales Mix × Selling Price

Mango = 3,035 × 0.2 × 150

= 91,050

Orange = 3,035 × 0.4 × 135

= 1,63,890

Guava = 3, 035 × 0.4 × 100

= 1,21,400

Thus, the break-even sales in ₹ are:

Mango = ₹ 91,050

Orange = ₹ 1,63,890

Guava = ₹ 1,21,400