Multi-product analysis

In this lesson

1. 0:00 Multi-product break-even analysis overview
2. 2:43 Weighted average contribution to sales ratio
3. 3:16 Break-even revenue calculation worked example
4. 5:21 Incorporating profit targets into multi-product analysis
5. 6:02 Profit target calculation with sales mix
6. 10:15 Break-even analysis using basket of goods
7. 11:32 Basket method worked example

About this lesson

You'll work through real examples using both revenue-based and basket-of-goods approaches, so you can handle any multi-product scenario in PM, APM, or management accounting papers. Multi-product break-even analysis assumes a constant sales mix, meaning products are always sold in consistent proportions. The core method involves calculating each product's contribution per unit, then finding the weighted average contribution to sales ratio by dividing total contribution by total revenue across all products. From there, you divide fixed costs by this ratio to find break-even revenue—exactly like single-product analysis, but adjusted for the product mix. The lesson walks you through two practical calculation methods. First, the revenue approach: you calculate the weighted average contribution to sales ratio, then divide fixed costs (or fixed costs plus target profit) by this ratio to get required sales revenue. You then break that revenue back into units for each product using the sales mix ratio. Second, the basket-of-goods approach: you group products into a single "basket" reflecting the sales mix, calculate contribution per basket, find how many baskets you need to break even, then multiply out to find units of each product. By mastering these techniques, you'll be able to handle multi-product questions confidently in exams, whether they ask for break-even revenue, break-even units, or sales needed to hit a profit target. The constant sales mix assumption simplifies the maths while reflecting real business scenarios where product proportions stay stable.

Duration: 14m