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John Moffat.
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Natasha1996
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1) How do we calculate BE units with multi-product? We can calculate BE revenue by an average basis by taking the (total contribution / total revenue) of all the products and use that C/S ratio to calculate BE revenue?
2) Is it true that with multi-product CVP analysis we can calculate Breakeven Revenue by calculating the C/S ratio (Total Contribution / Total Sales) of all the products, But we can’t calculate Breakeven Units since the Fixed cost given is the total of all units produced so it is not possible to calculate Breakeven units (such as in example 6)?
John Moffat
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I explain both of these in my free lectures working through the chapter on CVP analysis.
Natasha1996
- Topics: 34
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I already watched ur lecture that’s why I was asking about these queries. Is this below all correct?
1) In Single-Product CVP we can calculate Breakeven units; Breakeven revenue; Margin of Safety; C/S ratio; because we have fixed cost incurred which belongs to one product only so it is easier to calculate everything.
2) BUT with Multi-Product CVP we cannot calculate Breakeven units; Margin of Safety; because we have fixed cost incurred which belongs to more than one product (so we don’t know which product has how much fixed cost) so it is not possible to calculate them.
3) But we can calculate Breakeven revenue; C/S ratio by taking Average figures (i.e. Total Figures). So we calculate BE revenue by taking Average Figures such as (Total Contribution / Total Sales revenue) to get C/S ratio of all the products.
4) Although we can only use the Average C/S ratio to calculate BE revenue rather than BE units because we don’t know the individual Fixed cost of each product?
John Moffat
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Yes, all of that is correct.
Natasha1996
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