A manufacturing plant produces four different types of machinery tools. Products A, B, C, D with Selling Price, Variable Cost, Allocated Fixed Expenses per month given. Compute break-even level for each of the product.

Question

Accepted Answer

Using the standard data for the manufacturing plant:

| Product | Selling Price (₹) | Variable Cost (₹) | Gross Profit (₹) | Fixed Expenses (₹) |
|---------|------------------|-------------------|-------------------|--------------------|
| A       | 1,00,000         | 30,000            | 70,000            | 3,50,000           |
| B       | 50,000           | 25,000            | 25,000            | 2,50,000           |
| C       | 70,000           | 30,000            | 40,000            | 10,00,000          |
| D       | 2,00,000         | 1,00,000          | 1,00,000          | 15,00,000          |

**Break-Even Level for each product:**
BEP = Allocated Fixed Expenses / Gross Profit per Unit

- **Product A:** 3,50,000 / 70,000 = **5 units**
- **Product B:** 2,50,000 / 25,000 = **10 units**
- **Product C:** 10,00,000 / 40,000 = **25 units**
- **Product D:** 15,00,000 / 1,00,000 = **15 units**

Each product must sell at least its BEP quantity to cover its allocated fixed costs. If any product consistently fails to reach its BEP, the management should consider increasing sales, reducing costs, or discontinuing that product.