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Break-even analysis under Multi-product situation

Eg. Kirihetti Pvt Ltd produces three milk based products namely cream milk, soft milk and fluff milk. Budgeted data for forth coming years would be as follows:

Production and Sales (units)


Cream milk Soft milk Fluff milk 200,000 600,000 400,000

Selling Price per unit (Rs)


90 50 30

Variable cost Per unit (Rs) 50 30 20

Fixed cost is budgeted at Rs. 1,200,000 for the year. Calculate the level of sales required for break even.

If one wishes to find the required sales turnover for each product, the total sales revenue of Rs. 3,000,000 can simply be apportioned back in the standard ratio for sales value of each product and as well as number of units.

Budgeted Sales Rs 000

Break-even Sales reapportioned Rs 000

Break-even Sales (units) 000

Cream milk Soft milk

18,000

30

900

10

30,000 12,000 60,000

50 20 100

1,500 600 3,000

30 20 60
3

Fluff milk Total

Break-even Analysis: Fixed costs increases as the desired output increases


# of MC 1 2 3 Variable Cost Revenue Annual Fixed C. 9,600 15,000 20,000 10/unit 40/unit Output 0-300 300-600 600-900

Example Continued
BEP $ BEP TC

3
TC

TC TR
1

Quantity