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Fast Rite Ltd. manufactures a variety of stationery but its most popular product is its pen. Three varieties of pens to suit the need of its users.

The details of the pens are given in the table below.

Variety Classic Gel Pen Executive Ball Pen Four-in-one Ball Pen
Selling Price per unit (in rupees) 15 21 36
Variable cost per unit (in Rupees) 9 14 19
Sales Mix 20% 20% 60%

The total fixed cost is Rs. 2,56,000.

Calculate the following from the information given above.

i. Total weighted average contribution margin

ii. Breakeven Quantity for each variety

iii. Break even (in Rupees) for Four-in-one Ball Pen

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Best answer
Variety Classic Gel Pen Executive Ball Pen Four-in-one Ball Pen
(A) Selling Price per unit 15 21 36
(B) Variable cost per unit 9 14 19
(C) Contribution A-B (in Rupees) 6 7 17
(D) Sales Mix 20% 20% 60%
Weighted contribution (C× D) 6 7 17
1.2 1.4 10.2

i. Total weighted average contribution margin= Rs.12.8 (1.2+1.4+10.2)

ii. Breakeven Quantity for each variety

BEP = Total Fixed cost/ total weighted contribution

= 256000/12.8

=20,000 units

BEP for Individual

Classic Gel Pen Executive Ball Pen Four-in-one Ball Pen
20000 × 20% = 4000 units 20000 × 20% = 4000 units 20000 × 60% = 12,000 units

iii. Break even (in Rupees) for Four-in-one Ball Pen

Break even quantity × selling price /ball pen

2000 × Rs.36 = Rs. 72,000

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