Happy Hands Ltd. manufactures liquid hand wash in three varieties. Fixed cost Rs.2,49,000. Selling Price per 100ml and Variable Cost per 10ml given for Scrub, Gel, Foam with Sales Mix 40%, 30%, 30%. Calculate: (a) Total weighted average contribution margin. (b) Break-even-quantity for each variety. (c) Break-even-point in rupees for Scrub Hand Wash.

Question

Accepted Answer

Given:
- Fixed Cost = ₹2,49,000
- Sales Mix: Scrub 40%, Gel 30%, Foam 30%
- Selling Prices per 100 ml: Scrub ₹155, Gel ₹175, Foam ₹195
- Variable Costs (normalised to 100 ml): Scrub ₹75, Gel ₹95, Foam ₹105
- Contribution Margins: Scrub ₹80, Gel ₹80, Foam ₹90

**(a) Total Weighted Average Contribution Margin:**
= (80 × 0.40) + (80 × 0.30) + (90 × 0.30)
= 32 + 24 + 27
= **₹83 per unit**

**(b) Break-Even Quantity for each variety:**
Total BEP (units) = Fixed Cost / Weighted CM
= 2,49,000 / 83
= **3,000 units**

Per variety:
- Scrub Hand Wash: 3,000 × 40% = **1,200 units**
- Gel Hand Wash: 3,000 × 30% = **900 units**
- Foam Hand Wash: 3,000 × 30% = **900 units**

**(c) Break-Even Point in rupees for Scrub Hand Wash:**
= 1,200 × ₹155
= **₹1,86,000**

Verification: Total Contribution at BEP = (1,200 × 80) + (900 × 80) + (900 × 90) = 96,000 + 72,000 + 81,000 = ₹2,49,000 = Fixed Cost. Hence verified.