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Hi….
Page 22 …. question 62
Can you please help me with an explanation for such a scenario where breakeven revenue calculation is required for two products with shared fixed costs. Didn’t really understand why the C/S ratio average is used here.Sorry, but I do not have the Kaplan Kit (only the BPP Revision Kit).
Have you watched 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.
Yes, I have watched your lectures…I m confused the way they calculated breakeven revenue..can you please help to make me understand…
Below is the question
Edward sells two products with selling prices and contribution as follows
Product f Product G
Selling price $40 $20
Contribution $10 $4
Budgeted sales units 150,000 100,000Fixed costs $1,400,000 per year.
What is Edward’s current breakeven revenue to the nearest $ ?Have you tried it yourself using the method in the lectures??
The total budgeted revenue is 8,000,000.
The total budgeted contribution is 1,900,000Therefore the CS ratio is 19/80
Therefore the breakeven revenue is 1,400,000 / (19/80) = 5,894,737
(Assuming, of course, that they do sell in the budgeted mix)
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