Break-even analysis with multiple products

The method of calculating break-even point of a single product company has been discussed in the break-even point analysis article. In this article, I would explain the procedure of calculating break-even point of a multi product company. A multi-product company means a company that sells two or more products.

The procedure of computing break-even point of a multi product company is a little more complicated than that of a single product company.

Formula:

A multi product company can compute its break-even point using the following formula:

break-even-analysis-with-multiple-products-img1

For computing break-even point of a company with two or more products, we must know the sales percentage of individual products in the total sales mix. This information is used in computing weighted average selling price and weighted average variable expenses.

In the above formula, the weighted average selling price is worked out as follows:

(Sale price of product A × Sales percentage of product A) + (Sale price of product B × Sale percentage of product B) + (Sale price of product C × Sales percentage of product C) + …….

and the weighted average variable expenses are worked out as follows:

(Variable expenses of product A × Sales percentage of product A) + (Variable expenses of product B × Variable expenses of product B) + (Variable expenses of product C × Sales percentage of product C) + …….

When weighted average variable expenses per unit are subtracted from the weighted average selling price per unit, we get weighted average contribution margin per unit. Therefore, the above formula can also be written as follows:

break-even-analysis-with-multiple-products-img2

An example would be very helpful to understand the whole procedure. Consider the following example of a multi product company:

Example:

The Monster company manufactures three products – product X, product Y and product Z. The variable expenses and sales prices of all the products are given below:

break-even-analysis-with-multiple-products-img3

The total fixed expenses of the company are $50,000 per month. For the coming moth. Monster expects the sale of three products in the following ratio:
Product X: 20%;
Product Y: 30%;
Product Z: 50%

Required: Compute the break-even point of Monster company in units and dollars for the coming month.

Solution:

Monster company sells three products and is, therefore, a multi product company. Its break-even point can be computed by applying the above formula:

break-even-analysis-with-multiple-products-img1

= $50,000 / $95* – $55**
= $50,000 / $40
= 1,250 units

*Weighted average selling price:
= ($200 × 20%) + ($100 × 30%) + ($50 × 50%)
= $40 + $30 + $25
= $95

**Weighted average variable expenses:
= ($100 × 20%) + ($75 × 30%) + ($25 × 50%)
= $20 + 22.50 + 12.50
= $55

The company will have to sell 1,250 units to break-even. Now I would compute the number of units of each product to be sold:

Product X (1,250 × 20%): 250 units
Product Y (1,250 × 30%): 375 units
Product Z (1,250 × 50%): 625 units
Total:250 units + 375 units + 625 units = 1,250 units

As the number of units of each individual product to be sold have been computed, I can compute the break even point in dollars as follows:

break-even-analysis-with-multiple-products-img4

The break-even point of Monster company is $118,750. It can be verified by preparing a contribution margin income statement as follows:

break-even-analysis-with-multiple-products-img5

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34 Thoughts on Break-even analysis with multiple products

  1. Aamna

    Thank you for taking the time to write this article. It describes the procedure of calculating break-even point for a company selling three products. Can I use the same procedure for any number of products? Is it also applicable to services businesses?

  2. Accounting for Management

    The procedure is applicable for any number of products. Yes you can use it for service companies.

  3. NASH

    Hi I have 27 different items and 27 prices for each one and i am trying to make an excel break even chart can you please help…my email is nashid30@gmail.com,
    thanks

  4. Dinesh

    Hi Nash,

    Did you get any favorable reply from your request.

    my email is dinesh@tcisb.com.my

    Kind regards

    Dinesh

  5. Soumaya

    Hi
    First I would like to thank you for taking time to publish this article, it’s really helpful. However I have a question concerning the calculation of the breakeven for a service company (Business school) that is teaching 3 different programs, How can this method be applied?

  6. nil

    Please send worksheet through which I can workout break even point for company having more than 100 products.
    Email me on nilima_27@yahoo.com

  7. Ifeoluwa

    Thanks a lot for taking out time to explain this procedure, it has really helped me with my calculations. God bless you.

  8. Ava

    Thanks! Learned this in one go! Again God bless you.

  9. Francis

    Thanks
    I am Having a hard time for break even analysis because we are a multiprodut firm. Is there any one who has a wokksheet in which i can calculate breakeven point for company having more than 50 products?
    kindly email me. naj_franz@yahoo.com Thank you very much. I will really appreciate it if somebody can help me

  10. Patrick

    Hi can you make help me with this . We are required to do Break even analysis in our Feasibility Study without even teaching us how to . kindly mail me bC.pAtrickz101@gmail.com Thank you I’ll send you the datas if you will help me .

  11. Patrick

    Okey i’ll send it .

  12. Patrick

    I already send it to you . Thank man

  13. Tabatha

    Thanks,
    I too am having a hard time calculating my break even analysis for my company selling multiple products at different prices. Can you please help me? Kindly email me naturalbeauty1stop@yahoo.com Thank you so much!

  14. jessica painter

    Great article. This is exactly what I have been looking for.
    I plan to import and make jewellery and I am currently working on my business plan. I am having a heard time working out my break even point as I will be selling multiple products at different prices. Please can you send me a spreadsheet with the formula as also requested by Nil.

    Kind Regards
    Jess

  15. Shrey

    Hey! Thanks a lot for this article. I have a doubt regarding the allotment of total variable costs to individual products. For example, I have a retailing business and its monthly variable cost is Rs. 112500. Now tell me how to divide this amount among three products of retailing, that are, clothing, belts&hats, and accessories.
    Kindly help me with this soon.

    contact- shreybansal97@gmail.com

  16. charley

    Hi this is a great article! Would someone kindly send me the spreadsheet too please as this would help me save so much time! Turnercharlene@sky.com

  17. Natas

    Hi, I need to make a break-even analysis and chert for a comPany with 5 different services. Can you send me the sPreadsheet?

  18. Amir

    Hi Accounting management, been looking everywhere for this. I am managing an educational seminar and I’m using the techniques above to sell registration fees, booth and advert space as multiple products against the hall rental, food and speakers fees as my costs. May I have a copy of the excel spreadsheet?

  19. Gracynt

    Please help me solve this. You can email me the result please.
    The selling prices for 3 products is sh.30, sh30.50 and sh40. variable cost amount to sh sh50,sh60 and sh70. The three products contribute 50%,30% & 20% of the total revenue respectively. calculate breakeven point of the company in units

  20. M. Abdul-Raman

    Hi I need to calculate break even point but I can’t know how to estimate Sales percentage of product for each product can you help me ???? I already started doing excel program

  21. Jeremiah

    How can i calculate Break even pount fir multi products when not given sales.

  22. Hayley

    Hi,may I know that based on the example that you given ,how to find margin of safety ?
    Thankyou

  23. Abdul Samad

    Thank you so much.
    It really helped me solve L-5 Quadra Electronics.

  24. Choo

    Hi Accounting Management. This article really helpful. But my company has more than 100 products, can please send worksheet through which I can workout break even point?
    Email me on uniplasterhq@gmail.com

  25. Mesk

    This is very helpful. How can I calcuate break even for large number of products? do you have a spreadsheet to share? thank you!

  26. zandile chabangu

    Kindly email through anything that can help.. I HAVE 36 DIFFERENT PRODUCTS AND 11
    SERVICES. WHICH I PROVIDE..

  27. Benali Tremblay

    Hello is it possible to get a copy of the multiple products worksheet? I have 9 departments each supplying both products and services. That would be extremely appreciated. Thank you. Email: atfoamunltd@gmail.com

  28. Shemaine

    How do you work out the sales percentage please

  29. NJIKI BIKOI

    How do you work out the sales percentage please

  30. verior

    THANKS SO MUCH FOR THE LIGHT BEAMED ON THE TOPIC. HOW DO I CALCULATE THE SALES MIX OR PROPORTION OF SALES OF EACH PRODUCT THE PROPORTIONS ARE NOT GIVEN? WHAT VARIABLES SHOULD I USE? UNITS SOLD OR THE SALES VALUE?

  31. Megido Trading

    I’m so grateful for the empowering knowledge, difficult matters become so easy to comprehend.

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