Backup of CVP & SALES MIX

Backup of CVP - CVP ANALYSIS INVOLVING MULTIPLE PRODUCTS AND A SALES MIX When there are multiple products the total fixed costs are not usually

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CVP ANALYSIS INVOLVING MULTIPLE PRODUCTS AND A SALES MIX When there are multiple products, the total fixed costs are not usually allocated to individual products. Therefore, only a single break-even calculation can be undertaken for all products. This can be done using one of two methods: 1) using a weighted average CM/unit (which yields a break-even point in units ), or 2) using a weighted average CM % (which yields a breakeven point in $ ). Method 1: Under this method, the sales mix % is based on units sold . Therefore, we find the BE point in units using a weighted average CM per unit . Example: Products A B Sales ratio in units 1 : 3 Therefore, the sales Mix % based on units is 25% 75% Assume the CM/unit is $6 $8 Assume Total Fixed Cost is $150,000 Therefore, the weighted average CM = .25 x $6 + .75 x $8 =$7.50 BE point in units = $150,000 = 20,000 units $7.50 This 20,000 units can then be allocated between A and B according to the 25/75 sales mix (i.e, 5,000 units for A, and
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This note was uploaded on 03/03/2012 for the course ACCT 2460 taught by Professor Farrar during the Winter '12 term at Conestoga.

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