CA Intermediate · Cost and Management Accounting · Marginal Costing
Sundaram Foods Ltd makes two products, A and B. A sells at Rs 80 with variable cost Rs 50 and B sells at Rs 100 with variable cost Rs 70. Sales mix is 3 units of A to 2 units of B. Fixed costs are Rs 3,00,000. What is the break-even quantity of product A?
Break-even quantity of product A is 6,000 units. Each unit of both products yields Rs 30 contribution, so a five-unit mix gives Rs 150. Fixed costs of Rs 3,00,000 need 2,000 mixes, and three units of A per mix give 6,000 units.
- A6,000 unitsCorrect
- B10,000 units
- C5,000 units
- D7,500 units
Explanation
Contribution per unit is Rs 30 for A and Rs 30 for B. Per mix of 5 units (3A+2B) contribution = 3x30 + 2x30 = Rs 150. Break-even mixes = 3,00,000/150 = 2,000. Product A = 2,000 x 3 = 6,000 units. Check: B = 4,000 units; total contribution = 10,000 x 30 = Rs 3,00,000. Choosing 10,000 gives total units, not A.
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