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1) when the question gives data for 2 products and also the fixed cost per unit of both products and in the question they tell that only 1 of the product is produced so then do we take the fixed costs of both products while calculating the breakeven or only for the one which is produced?
2) In some questions they say that for example “for every S , 5 Ts are sold ‘
what do i do in this case ?1. You take the total budgeted fixed cost – the total fixed cost will not change if only one is produced (unless, of course, there are specific fixed costs mentioned).
2. It depends what the question actually wants!
1)yeah in the question specific fixed costs was mentioned for the product which is not produced so i think i would have to deduct it from the total budgeted fixed cost ?
2)A company produces 2 products, TJ and TS. For every TJ, 5 TS are sold. Budgeted fixed cost is supposed to be $100,000. C/S ratio for TJ and TS is 25% and 30% respectively.
what is the breakeven revenue?this type of question i mean,pls reply 🙂
thanks
1. Correct.
2. It means that for every 6 units sold then 1 will be TJ and 5 will be TS. I explain how to deal with this in my free lectures on multi-product CVP analysis. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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