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Multi-product breakeven analysis

Forums › Ask CIMA Tutor Forums › Ask CIMA P1 Tutor Forums › Multi-product breakeven analysis

  • This topic has 4 replies, 3 voices, and was last updated 8 years ago by Cath.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • September 10, 2016 at 9:56 pm #339744
    gladwell
    Participant
    • Topics: 1
    • Replies: 1
    • ☆

    hello
    please help me with the following question below. I am failing to understand even the worked answer provided for the very question. Your help will greatly be appreciated

    PER plc sells three products. The budgeted fixed cost for the period is $648,000. The budgeted contribution
    to sales ratio (C/S ratio) and sales mix are as follows.
    Product C/S ratio Mix
    P 27% 30%
    E 56% 20%
    R 38% 50%

    The breakeven revenue is:

    September 11, 2016 at 11:15 am #339786
    alexbelokonskiy
    Participant
    • Topics: 0
    • Replies: 2
    • ☆

    Hello , I try may be I am wrong

    so we need finally to have the result as Fixed Costs /(C/S) hence 648000/(C/S)

    C/S we know such as 0.27 / 0.56 / 0.38
    Sales mix we know as 3:2:5
    weighted average contribution is (3*0.27+2*0.56+5*0.38) / total sales (3+2+5) = 0.383 this is C/S coef.

    Finally we should have 648 000 / 0.383 = 1 691 609 ( please consider decimal numbers, it is really impacting).

    please correct me if I am wrong,
    thank you

    September 11, 2016 at 3:14 pm #339811
    Cath
    Participant
    • Topics: 0
    • Replies: 448
    • ☆☆☆

    Hi,
    Thanks for your response Alexbelokonshly – this is 99.9% correct but may I remind you that it is the general CIMA forums where your help is most welcomed. The Ask a Tutor forum is designed for tutor’s responses only.

    Thank you for your help anyway- the calculation is just as you state – except the final figure of $648,000 /0.383 =$ 1,691,906 ( not 1,691,609 as stated).

    Hope that helps

    September 12, 2016 at 12:54 pm #340060
    alexbelokonskiy
    Participant
    • Topics: 0
    • Replies: 2
    • ☆

    Sorry I have realized it later. My apologize.

    September 12, 2016 at 9:33 pm #340243
    Cath
    Participant
    • Topics: 0
    • Replies: 448
    • ☆☆☆

    No worries – thanks for your contribution anyway & best of luck with your studies 🙂

  • Author
    Posts
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