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Multi-product break-even analysis requires an assumption about the

  • A.selling price of a single product only
  • B.total fixed cost being zero
  • C.products having identical variable costs
  • D.sales mix between the products

Answer: D

Correct answer: sales mix between the products

With several products there is no single contribution per unit, so a break-even in units is meaningless until it is assumed that the products sell in a fixed proportion. That assumed mix allows a weighted average contribution to be computed and a break-even found - but the answer is valid only at that mix, and a shift in mix moves the break-even point without any change in prices or costs.

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