Managerial Accounting For Dummies

Chapter 11

Reality Check: Making and Selling More than One Product

In This Chapter

Finding the break-even point when you make more than one product

Maximizing limited capacity

Deciding whether to discontinue a product line

Earlier chapters in this book assume that a company makes just one product and that the company has the ability to make and sell as much of that product as it wants. This scenario keeps things simple but isn’t necessarily realistic.

Welcome to reality. Most companies sell many products — often hundreds or even thousands of different models — and usually have limited capacity (only enough machinery, space, and workers to produce a restricted amount of finished goods during a time period).

In this chapter, I show you how to figure out the break-even point when you make and sell more than one product. I explain how to determine which products to make when limited capacity prevents you from producing as much as you can sell. Because profits and break-even points sometimes force you to make hard decisions, I also discuss how to decide when to outsource or discontinue a product.

Preparing a Break-Even Analysis with More than One Product

As I explain in Chapter 9, managers ...