'Happy Hands Ltd.' manufactures liquid hand wash for children with minimal chemicals. They have three varieties of liquid soap. The fixed cost for the production process is ₹ 2,49,000. Variety | Scrub Hand Wash | Gel Hand Wash | Foam Hand Wash Selling Price per 100 ml in (₹) | 155 | 175 | 195 Variable Cost per 10 ml in (₹) | 75 | 95 | 105 Sales Mix | 40% | 30% | 30% Form the above data, calculate the following : (a) Total weighted average contribution margin. (b) Break-even-quantity for each variety of liquid hand wash. (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.