There are three friends Ram, Shyam and Mohan. They decided to start a business in the name of RSM Brothers and they decided to share the profit equally. All of them decided to manufacture gel and ball pen. They thought of selling each gel and ball pen at Rs. 12 and 20 respectively. Their fixed expenses were Rs. 77,000 (Salary Rs. 12,000, Rent Rs. 65,000).

The cost of producing each gel and ball pen was Rs. 5 and Rs. 12 respectively. At the end of year they got to know that out of total revenue from sales, the sales mix percentage was 30% and 70% respectively.

Mr. Ram, Shyam and Mohan are planning to continue business at large scale in future.

On the basis of above case study, find out answer of following questions.

Find out B.E.P (In units) of the business:

10,000 Units

The correct answer is option (3):- 10,000 Units

Steps to calculate BEP in units:

Step 1: Calculate the contribution margin per unit for each product:

Step 2: Calculate the weighted-average contribution margin per unit for the sales mix using the following formula:

(Step 2):Sum: Weighted average CM per unit= 2.1+5.6= Rs 7.7/–

Step 3: Calculate total units of sales mix required to break-even using the formula:

Break-even point in units of sales mix = Total fixed cost ÷ Weighted average CM per unit

                                                               = 77,000 ÷ 7.7

                                                               =10,000 Units