Cost Accounting

Breakeven with Multiple Products

Two Product Example [methods work for more than 2 products]
Product
Alpha
p
v
cm

Beta

10
6
4

Total

25
10
15

3900

500

300

800

R
V
CM
F
I

5000
3000
2000

7500
3000
4500

12500
6000
6500
3900
2600

historical
or

cmr

projected
mix

0.52

975

975

R
V
CM
F
I

9750
5850
3900

0
0
0

9750
5850
3900
3900
0

product
Alpha

cmr

only
breakeven

0.4

260

260

R
V
CM
F
I

0
0
0

6500
2600
3900

6500
2600
3900
3900
0

product
Beta

cmr

only
breakeven

0.6

375

160

535

R
V
CM
F
I

3750
2250
1500

4000
1600
2400

7750
3850
3900
3900
0

alternate
mix

cmr

breakeven
one

0.50322581

225

200

425

R
V
CM
F
I

2250
1350
900

5000
2000
3000

7250
3350
3900
3900
0

alternate
mix

cmr

breakeven
two

0.53793103

300

180

480

R
V
CM
F
I

3000
1800
1200

4500
1800
2700

7500
3600
3900
3900
0

same
mix

cmr

breakeven

0.52

BER = F / cmr = 3900 / .52 = 7500

[10 * QA] + [25 * QB] = 7500
QA / QB = 500 / 300
QA = [500 * QB] / 300 = [5 / 3] * QB
[10 * [5 / 3] * QB] - [25 * QB] = 7500
QB = 180
QA = 300
Q

300

180

480

R
V
CM
F
I

3000
1800
1200

4500
1800
2700

7500
3600
3900
3900
0

solution
based on

cmr

cmr

0.52

alternative way to get to the same 300, 180 quantities:

average contribution per unit at the 5 : 3 mix:
average cm =

[4 * [5 / 8]] + [15 * [3 / 8]] = [65 / 8]

BEQ = F / cm = 3900 / [65 / 8] = 480

480 * [5 / 8] =

300

480 * [3 / 8] =

180

500

300

p
v
cm

10
6
4

25
10
15

mix quantities

product

solution

unit

based on

data

"bundle"
concept

p
v
cm

bundle

125
60
65

data

3900 / 65 = 60

Q
bundle
R
V
CM
F
I
cmr

1/9/2014

minimum bundle, same mix

breakeven bundles

60 * 5

60 * 3

300

180

mix quantities

3000
1800
1200

4500
1800
2700

7500
3600
3900
3900
0
0.52