Principles of Managerial Accounting · free preview
Break-Even Analysis with Multiple Products
When a company sells several products, break-even analysis uses the weighted average contribution margin of the sales mix, computed from each product's margin and its share of total sales.
1. The mix complicates the margin
The mix complicates the margin
2. Weighted average contribution margin
Weighted average contribution margin
3. The dollar-weighted alternative
The dollar-weighted alternative
4. Mix shift sensitivity
Mix shift sensitivity
5. Weighted average computation
Product A contributes 20 dollars per unit and Product B contributes 40 dollars per unit. The unit mix is three A to one B. Compute the weighted average contribution margin.
6. Blended break-even units
Fixed costs are 60,000 dollars and the weighted average contribution margin is 25 dollars. Compute the blended break-even point in total units.
7. Mix split at break-even
Blended break-even is 2,400 units at a three-to-one mix of A to B. Compute the units of each product at break-even.
8. Mix shift toward higher margin
What happens to break-even if the mix shifts toward Product B, the higher-margin product?
9. Weighted margin units check
A four-unit bundle of three A and one B contributes 100 dollars. Compute how many bundles cover 60,000 dollars of fixed costs. Number only.
10. Dollar-weighted ratio
Product A carries a 40 percent margin ratio on 60 percent of revenue, and Product B carries 50 percent on 40 percent. Compute the weighted contribution margin ratio as a decimal.
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