'Star Bakery Pvt. Ltd.' produces two types of cakes — Chocolate Cake and Vanilla Cake. The company wants to know the break-even point of each type of cake. For the same, the following information is available : Product | Selling Price Per Unit (₹) | Variable Cost Per Unit (₹) | Sales Mix % Chocolate Cake | 200 | 120 | 40 Vanilla Cake | 150 | 90 | 60 Total fixed cost is ₹ 1,15,600. (a) Calculate the break-even point in units of sales mix. (b) Calculate the number of units of each product at break-even point. (c) Also calculate break-even point in rupees.

Question

Accepted Answer

Given:
- Fixed Cost = ₹1,15,600
- Chocolate Cake: SP = ₹200, VC = ₹120, CM = ₹80, Sales Mix = 40%
- Vanilla Cake: SP = ₹150, VC = ₹90, CM = ₹60, Sales Mix = 60%

**(a) Break-Even Point in units of sales mix:**
Weighted Average CM = (80 × 0.40) + (60 × 0.60)
= 32 + 36
= **₹68 per unit**

Total BEP (units) = Fixed Cost / Weighted CM
= 1,15,600 / 68
= **1,700 units**

**(b) Number of units of each product at break-even point:**
- Chocolate Cake: 1,700 × 40% = **680 units**
- Vanilla Cake: 1,700 × 60% = **1,020 units**

**(c) Break-Even Point in rupees:**
- Chocolate Cake: 680 × ₹200 = ₹1,36,000
- Vanilla Cake: 1,020 × ₹150 = ₹1,53,000
- **Total BEP (₹) = ₹2,89,000**

Verification: Total Contribution = (680 × 80) + (1,020 × 60) = 54,400 + 61,200 = ₹1,15,600 = Fixed Cost. Hence verified.