CVP Analysis Flashcards
How would one calculate the breakeven point in multiproduct (or services) problems?
One approach to multiproduct breakeven problems it to divided fixed costs by the UCM for a composite unit (when unit prices are known) to determine the number of composite units. The number of individual units can then be calculated based on the stated mix
In a multiple product (or service) problem, the breakeven point in total units varies with the sales mix. The BEP in units will be lower (higher) when the proportion of high (low) CM items is greater. Thus, there is no unique breakeven point in multi-product situations. The breakeven point depends upon the specific mix of products
The breakeven point can be calculated for a multi-product situation by using a weighted-average composite unit contribution margin in the denominator
How would a breakeven point be calculated if resources are limited?
When resources are limited, a company may produce only a single product
A breakeven analysis of the point where the same operating income or loss will result (regardless of the product selected) is calculated by setting the breakeven formulas of the individual products equal to each other
