C-v-p analysis – multiple products, Managerial Accounting

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C-V-P ANALYSIS – MULTIPLE PRODUCTS

The simple product CVP analysis can be extended to handle the more realistic situations where the firm produces more than one product. The objective in such a case is to produce a mix that maximizes total contribution.

Total BEP units = Total fixed cost

Average CM

Here:

α_t is the sales mix of product t.

S_t is the selling price of product t

V_tis the variable cost of product t.

n is the number of units of product t sold

BEP_{t units} = αt (Total BEP_units)

BEP _tsh. = BEP_t(units) xSt

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