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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
breakeven 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 breakeven 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.
 Winter '12
 Farrar

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