11) Breakeven analysis

Question 1

Calculate Breakeven Revenue (when given sales mix for multiple products - and when question doesn’t include enough info to calculate weighted avg. C/S ratio)

Answer 1

1) Weighted avg. contribution = Total Contribution / Total units

2) Breakeven units = Fixed costs / Weighted avg. contribution

3) Apportion breakeven units between products as per sales mix

4) Multiply each product’s breakeven units by its sales price (revenue) then sum for total breakeven revenue

Question 2

On a break-even chart the intersection of which two lines will give the break-even point in units?

Answer 2

-Total sales line

-Total costs line

Question 3

In what order are products drawn onto a multi-product profit-volume graph/chart?

Answer 3

Based on their contribution to sales ratio (CS ratio) in order of highest to lowest.