B.E. point (in revenue) = Fixed cost

Weighted average P/V ratio

Problem Ahmedabad Company Ltd. manufactures and sells four types of products under the brand name Ambience, Luxury, Comfort and Lavish. The sales mix in value comprises the following:

**Brand name Percentage**

Ambience 33 1/3

Luxury 41 2/3

Comfort 16 2/3

Lavish 8 1/3

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100

The total budgeted sales (100%) are $. 6,00,000 per month.

The operating costs are:

Ambience 60% of selling price Luxury

Luxury 68% of selling price Comfort

Comfort 80% of selling price Lavish

Lavish 40% of selling price

The fixed costs are $. 1,59,000 per month.

a. Calculate the breakeven point for the products on an overall basis.

b. It has been proposed to change the sales mix as follows, with the sales per month remaining at $. 6,00,000:

Brand Name Percentage

Ambience 25

Luxury 40

Comfort 30

Lavish 05

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100

Assuming that this proposal is implemented, calculate the new breakeven point.

Solution

a. Computation of the Breakeven Point on Overall Basis

b. Computation of the New Breakeven Point

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