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Edlintics

Multi-product break-even

Multi-product break-even extends standard break-even analysis to firms selling several products simultaneously.

Also known asmulti-product CVP

ByHoang TruongUpdated

FrameworkCost-volume-profit (CVP) analysis

See it move

Loading infographic...

The infographic is a four-step ladder illustrating how to calculate the break-even point when two products are sold in a fixed mix. The sales mix is set at 70 per cent pens and 30 per cent notebooks; the weighted contribution margin is then computed as (0.70 × €0.80) + (0.30 × €3.00) = €1.46 per composite unit; dividing total fixed costs of €14,600 by €1.46 yields a break-even of 10,000 composite units; and those 10,000 units are finally split back into 7,000 pens and 3,000 notebooks in line with the original mix.

Where it fits
SubjectCost AccountingAdvancedTopicCost-Volume-Profit AnalysisAdvanced

The formula

LaTeX
CM‾=∑iCMi×wi\overline{CM} = \sum_i CM_i \times w_i

Variables

Unit contribution margin for product i (€)
Sales mix proportion for product i (decimal)

The weighted-average CM must be recalculated whenever the assumed product mix changes.

LaTeX
QBEP=FCM‾Q_{\text{BEP}} = \frac{F}{\overline{CM}}

Variables

Total fixed costs for the period (€)
Weighted-average contribution margin per unit across the product mix (€)

Multiply total break-even units by each product's mix proportion to find that product's share of break-even volume.