August 2011
Beginner
547 pages
16h 12m
English
Content preview from Fundamentals of Financial Management, Third Edition
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20.4 SALES-MIX AND BREAK-EVEN ANALYSIS
The determination of BEP becomes a little cumbersome if more than one product is involved. The added task in such cases is to calculate the weighted average of the marginal contributions. Since different products have different costs—fixed and variable, as also different sale prices, their marginal contribution has to differ. It is because of this difference that a weighted average is computed.
EXAMPLE
Suppose a firm sells two products — A and B. For Product A, the variable cost is Rs 2 and the sale price is Rs 4 per unit. For Product B, the variable cost and the sale price are Rs 3 and Rs 5 respectively per unit. The fixed cost of the firm is Rs 40,000. Now the marginal contribution for Product A would ...
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