Question

Please provide a general discussion on breakeven analysis and multiple products and breakeven analysis and its core assumptions with its formula.

PLEASE MAKE SURE TO ANSWER IN MORE THAN 350 WORDS IN WORD FORMAT ONLY. Please do not copy paste from wikipedia,inclopedia websites.

Thanks

Answer 1

Meaning of breakeven:

Breakeven point is a point where total income equals to total expenses,i e, situation at which there is no profit or no loss.

Formula for calculating of breakeven of single product company= Fixed cost/Sales price per unit-Variable cost per unit

OR
Breakeven point= Fixed cost/ contribution per unit

Multiple product break even analysis:

Multiple product company means a company dealing in two or more products. For computing break-even point of a company with two or more products, we must know the sales percentage of individual products in the total sales mix.

Formula=

Breakeven sales= Fixed cost/weighted average selling price- weighted avaerage variable expenses

As there are two or more products we need to take weighted average. for finding out weighted average selling price= (Sale price of product 1 × Sales percentage of product 1) + (Sale price of product 2 × Sale percentage of product 2) +..... and same for weighted avaerage variable expenses

OR

Break even point= Total fixed cost/ weighted average contibution per unit.

Core Assumptions:

1.Prices are constant.

2.Product mix is constant.

3.It assumes constant technology and no improvement in labour efficiency

4.Fixed cost remain constant even with increase in volume