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Explain multiproduct breakeven analysis. What is the assumption on...

Explain multiproduct breakeven analysis. What is the assumption on proportions among the quantities in multiproduct breakeven analysis?
Provide a hypothetical example of multiproduct breakeven analysis.

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Multi-product break-even analysis

The multi-product break-even analysis refers to the process of determining how many units of different products offered by the
company are required to be sold for the company to break-even, i.e. to recover its variable and fixed costs. At this point, the
company will not be making any profits nor it will be incurring any losses.

The assumptions on proportions among quantities in multi-product break-even analysis:

The most important assumption in regards proportion of quantities of products is that the sales mix of the products of the company
are to remain constant over the period, and if there is a change in the sales mix, then the whole CVP analysis is to be done from
beginning.

Other assumptions are that the costs should be perfectly divided into fixed and variable costs and the cost behavior is linear in
nature as well, i.e. they will increase but the fixed costs will remain the same at all levels of activity through out the relevant range. 

Example of multi-product break-even analysis

Let's assume the following information regarding the three products of a company:

Now, the formula to calculate the multi-product break-even point is:

Break-even point = Total fixed costs / (Weighted average selling price - Weighted average variable expense)

Now,
The weighted average selling price = (Selling price of A * Sales mix percentage of A) + (Selling price of B * Sales mix percentage of
B) + (Selling price of C * Sales mix percentage of C)
= ($500 * 50%) + ($400 * 30%) + ($300 * 20%)
 = $250 + $120 + $60
Question
= $430
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And,
Weighted average variable cost = (Variable cost of A * Sales mix percentage of A) + (Variable cost of B * Sales mix percentage of B)
+ (Variable cost of C * Sales mix percentage of C)
= ($200 * 50%) + ($150 * 30%) + ($100 * 20%)
= $100 + $45 + $20
= $165

Therefore,
Break-even point = $265,000 / ($430 - $165)
                            = $265,000 / $265
                           = 1,000 units

The company is required to sell 1,000 units to break-even, and the number of units to be sold of each product can be
calculated as follows:
Product A = (1,000 * 50%) = 500 units
Product B = (1,000 * 30%) = 300 units
Product C = (1,000 * 20%) = 200 units

And, the break-even point in dollars can be calculated as follows:

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