Practicing Success

Register
Start Free Mocks
CUETMOCK

Ace Your

CUET Preparation Today

Start Free Mocks
Home Questions K3GCRQDTM7
Target Exam

CUET

Subject

Entrepreneurship

Chapter

Business Arithmetic

Question:

Toy craft produces toy alligators and toy dolphins. Fixed costs are  Rs 1,290,000 per year. Sales revenue and variable costs per unit are as follow:

Particulars Alligators (in Rs) Dolphins (in Rs)
Sales price 20 25
Variable Price 8 10

Suppose the company currently sells 60,000 alligators per year and 140,000 dolphins per year (Sales mix percentage 6:14). Assuming the sales mix stays constant, answer the following question.

What is the total number of units of all toys (including dolphins and alligators) for break even points?

Options:

27446 units

64042 units

1,00,000 units

91,849 units

Correct Answer:

91,849 units

Explanation:

 

Particulars Alligators (in Rs) Dolphins (in Rs) Total 
Total Units 60,000 1,40,000 2,00,000
Sales price (Rs)  20 25  
Variable Price 8 10  
Sales  12,00,000 35,00,000 47,00,000
Variable Cost 4,80,000 14,00,000 18,80,000
Contribution Margin in Rs (Sales-Variable Cost) 7,20,000 21,00,000 28,20,000
Less Fixed Cost     12,90,000
Net Income     15,30,000

 Weighted Average Contribution Margin= Total Contribution/ Total Units

28,20,000/2,00,000=Rs 14.10

Break Even Point= Fixed Cost/Weighted Average Contribution =12,90,000/14.10=91,489 Units

Allocating total units to each products based on Expected Units Proportion=6:14

Alligators to be produced for breakeven= 91,489*6/20=27446 Units

Dolphins to be produced for breakeven=91,489*14/20=64,042 Units

So the company has to produce 27446 toy alligators and 64042 toy dolphins for breakeven.

CUET Questions