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 Rs. 1,76,000. Given below is information about Mango, Orange and Guava fruit juices.

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

From the above data, calculate the following :
(a) Total weighted average contribution margin per unit.
(b) Break-even point in units of sales mix.
(c) Break-even point (in <) for each type of juice.

Hint:

In a multi-product scenario, use sales mix percentages to compute weighted average contribution and break-even figures.

Answer 1

(a) Total Weighted Average Contribution Margin per unit:

Contribution per unit:
Mango: Rs. 150 - Rs. 80 = Rs. 70
Orange: Rs. 135 - Rs. 65 = Rs. 70
Guava: Rs. 100 - Rs. 60 = Rs. 40

Weighted Average Contribution Margin:
(70 × 0.20) + (70 × 0.40) + (40 × 0.40) = 14 + 28 + 16 = Rs. 58

(b) Break-even Point in Units of Sales Mix:
Break-even units = Fixed Cost ÷ Weighted Average Contribution Margin
= 1,76,000 ÷ 58 ≈ 3,034 units

(c) Break-even Sales (in Rs.) for each type of juice:

Sales mix units:
Mango: 20% of 3,034 = 0.20 × 3,034 ≈ 607 units
Orange: 40% of 3,034 = 0.40 × 3,034 ≈ 1,214 units
Guava: 40% of 3,034 = 0.40 × 3,034 ≈ 1,213 units

Break-even sales:
Mango = 607 × Rs. 150 = Rs. 91,050
Orange = 1,214 × Rs. 135 = Rs. 1,63,890
Guava = 1,213 × Rs. 100 = Rs. 1,21,300

Total Break-even Sales:
Rs. 91,050 + Rs. 1,63,890 + Rs. 1,21,300 = Rs. 3,76,240