Me ole cock spaniel plc. makes 3 products, details as follows:

Apples (£)       Pears (£)         Cockneys (£)

Selling price        60               80                    40

Variable cost       (20)            (30)                  (20)

Contribution        40              50                    20

Sales (units)      2,000             3,000               5,000

Fixed overhead for the year £800,000

Calculate the break-even level of sales?

Solution:

Average contribution per unit

2,000 x £40 = 80,000

3,000 x £50 = 150,000

5,000 x £20 = 100,000

Total    330,000/ 10,000 units = £33 average contribution per unit

OR 2/10 x £40 + 3/10 x £50 + 5/10 x £20 = £33 average contribution per unit

£800,000 / £33 per unit = 24,242 units sold (in the mix 2:3:5)

Break-even revenue

Apples            2/10 x 24,242 units sold =      4,848   x £60 = 290,880

Pears              3/10 x 24,242 units sold =      7,273   x £80 = 581,840

Cockneys        5/10 x 24,242 units sold =      12,121 x £40 = 484,840

24,242 1,357,560

Alternative method would be to use the average C/S ratio

Apples                        0.666 x 0.2 =   0.133

Pears                           0.625 x 0.3 =   0.1875

Cockneys                    0.500 x 0.5 =   0.25

0.5705

£800,000/0.5705 = £1,402,278 (close enough to £1,357,560 above!!!)