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CMA Intermediate · Management Accounting · Marginal Costing (Management Accounting)

Mehta Industries produces two products, A and B, in a constant sales mix of 3 units of A to 2 units of B. A sells at ₹100 with variable cost ₹60 per unit; B sells at ₹80 with variable cost ₹50 per unit. Fixed costs are ₹3,60,000. What is the break-even quantity of product A?

Break-even quantity of A is 6,000 units. Each package of 3 A and 2 B gives contribution of ₹180, so ₹3,60,000 of fixed costs needs 2,000 packages, which means 6,000 units of A and 4,000 units of B.

  1. A4,000 units
  2. B6,000 unitsCorrect
  3. C3,600 units
  4. D5,000 units

Explanation

Contribution per unit: A = 40, B = 30. Per mix package of 3A + 2B: 3x40 + 2x30 = ₹180. Packages to break even = 3,60,000 / 180 = 2,000. Product A = 2,000 x 3 = 6,000 units (B = 4,000). Check: 6,000x40 + 4,000x30 = 2,40,000 + 1,20,000 = 3,60,000. Option 4,000 is the break-even quantity of B, not A.

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