Break-Even Analysis for Multiple Products

What is the break-even point for each product based on the sales mix and cost data provided?

Given the sales price, variable cost, and sales mix for three products, what are the break-even units for Product A, Product B, and Product C?

Break-Even Analysis for Each Product:

Product A Break-Even Units: 321.42 units

Product B Break-Even Units: 500 units

Product C Break-Even Units: 816.5 units

Break-even analysis is a crucial tool for businesses to determine the point at which total revenues equal total costs, resulting in neither profit nor loss. By calculating the break-even point, companies can make informed decisions regarding pricing strategies, cost control, and overall profitability.

Calculation for Product A:

Given the sales mix of 40% for Product A, the contribution margin and contribution margin ratio were calculated using the sales price and variable cost. By applying the break-even formula, the break-even point for Product A was determined to be 321.42 units.

Calculation for Product B:

Product B, with a sales mix of 35%, also underwent the same calculations for contribution margin and break-even point. The break-even units for Product B were found to be 500 units.

Calculation for Product C:

With a sales mix of 25%, Product C's contribution margin and break-even point calculations led to the determination of 816.5 units as the break-even units for Product C.

Conclusion:

By analyzing the break-even points for each product, businesses can adjust their production levels, pricing strategies, and cost structures to ensure profitability. Understanding the break-even analysis is essential for sustainable growth and financial success in the competitive market.