{"id":87,"date":"2021-01-26T22:02:55","date_gmt":"2021-01-26T22:02:55","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/?post_type=chapter&#038;p=87"},"modified":"2021-07-21T19:57:08","modified_gmt":"2021-07-21T19:57:08","slug":"sales-mix","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/chapter\/sales-mix\/","title":{"raw":"Sales Mix","rendered":"Sales Mix"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Calculate multiple product break-even points<\/li>\r\n<\/ul>\r\n<\/div>\r\n<img class=\" wp-image-777 alignright\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/17150454\/tom-hermans-9BoqXzEeQqM-unsplash-300x200.jpg\" alt=\"Multiple books on a cart.\" width=\"194\" height=\"129\" \/>To calculate the break-even point for multiple product lines, first determine the <strong>sales mix<\/strong>, which is the percent of overall sales each of the two products represents.\r\n\r\nLet\u2019s say that BlankBooks, Inc. is considering adding a second product\u2014a fancier version of the plain journal. Each product will have its own unit selling price and unit variable cost, as follows:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Plain<\/th>\r\n<th class=\"r\" scope=\"col\">Fancy<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td>Sales price per unit<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 \u00a0\u00a0 10.00<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 14.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Less: Variable cost per unit<\/td>\r\n<td class=\"r\">8.30<\/td>\r\n<td class=\"r\">13.30<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>= Contribution margin per unit<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1.70<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 0.70<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nTo calculate break-even, we\u2019ll use a weighted average of the two contribution margins based on the expected product mix that the sales manager and production manager have initially agreed is possible.\r\n<p style=\"padding-left: 60px;\">Plain 2,320 units<\/p>\r\n<p style=\"padding-left: 60px;\">Fancy 580 units<\/p>\r\n\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\" style=\"height: 96px;\">\r\n<tbody>\r\n<tr style=\"height: 12px;\">\r\n<th class=\"r\" style=\"height: 12px; width: 216.5px;\" scope=\"col\"><\/th>\r\n<th class=\"r\" style=\"height: 12px; width: 209.5px;\" scope=\"col\">Plain<\/th>\r\n<th class=\"r\" style=\"height: 12px; width: 199.5px;\" scope=\"col\">Fancy<\/th>\r\n<th class=\"r\" style=\"height: 12px; width: 209.5px;\" scope=\"col\"><span class=\"u-sr-only\">Total<\/span><\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr style=\"height: 12px;\">\r\n<td style=\"height: 12px; width: 216.5px;\">Sales price per unit<\/td>\r\n<td class=\"r\" style=\"height: 12px; width: 209.5px;\">$ \u00a0 \u00a0 \u00a0\u00a0 \u00a0 10.00<\/td>\r\n<td class=\"r\" style=\"height: 12px; width: 199.5px;\">$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 14.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 12px;\">\r\n<td style=\"height: 12px; width: 216.5px;\">Less: Variable cost per unit<\/td>\r\n<td class=\"r\" style=\"height: 12px; width: 209.5px;\">8.30<\/td>\r\n<td class=\"r\" style=\"height: 12px; width: 199.5px;\">13.30<\/td>\r\n<\/tr>\r\n<tr style=\"height: 12px;\">\r\n<td style=\"height: 12px; width: 216.5px;\">= Contribution margin per unit<\/td>\r\n<td class=\"r line-single\" style=\"height: 12px; width: 209.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1.70<\/td>\r\n<td class=\"r line-single\" style=\"height: 12px; width: 199.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 0.70<\/td>\r\n<\/tr>\r\n<tr style=\"height: 12px;\">\r\n<td style=\"height: 12px; width: 216.5px;\">X Sales mix in units<\/td>\r\n<td class=\"r\" style=\"height: 12px; width: 209.5px;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 2,320.00<\/td>\r\n<td class=\"r\" style=\"height: 12px; width: 199.5px;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 580.00<\/td>\r\n<td class=\"r\" style=\"height: 12px; width: 209.5px;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 2,900.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 12px;\">\r\n<td style=\"height: 12px; width: 216.5px;\">Contribution margin<\/td>\r\n<td class=\"r line-single line-double\" style=\"height: 12px; width: 209.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 3,944.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\" style=\"height: 12px; width: 199.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0\u00a0\u00a0\u00a0406.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\" style=\"height: 12px; width: 209.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0\u00a0\u00a0\u00a0 \u00a0 4,350.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr style=\"height: 12px;\">\r\n<td style=\"height: 12px; width: 216.5px;\">Weighted average contribution margin<\/td>\r\n<td style=\"height: 12px; width: 209.5px;\"><\/td>\r\n<td style=\"height: 12px; width: 199.5px;\"><\/td>\r\n<td class=\"r line-double\" style=\"height: 12px; width: 209.5px;\">$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1.50<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr style=\"height: 12px;\">\r\n<td style=\"height: 12px; width: 216.5px;\"><\/td>\r\n<td style=\"height: 12px; width: 209.5px;\"><\/td>\r\n<td style=\"height: 12px; width: 199.5px;\"><\/td>\r\n<td style=\"height: 12px; width: 209.5px;\"><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nA <strong>straight average<\/strong> of the two contribution margins would be (1.70 + 0.70) \/ 2 = 1.20, but a simple average like that doesn\u2019t take into account the fact that we are planning to sell four times as many plain journals as we do fancy (expressed as a ratio, it would be 4:1).\r\n\r\nA <strong>weighted average<\/strong> takes the different volumes of each product into account by first extending the contribution margins to get the total contribution margin, and then dividing that amount by the total units.\r\n<p style=\"padding-left: 60px;\">The contribution margin for plain journals will be $1.70 X 2,320 = $3,944.00.<\/p>\r\n<p style=\"padding-left: 60px;\">The contribution margin for fancy journals will be $0.70 X 580 = $406.00.<\/p>\r\n<p style=\"padding-left: 60px;\">The total contribution margin will be $3,944.00 + $406.00 = $4,350.<\/p>\r\n<p style=\"padding-left: 60px;\">Divide that by total units of 2,900 and we get a weighted average contribution margin of $1.50.<\/p>\r\nTo get the break-even quantity then, we would divide total fixed costs that need to be covered by the weighted average contribution margin:\r\n<p style=\"padding-left: 60px;\">$3,400 \/ 1.50 = 2266.6666<\/p>\r\nThis is a repeating decimal that is more accurately expressed as a fraction = 2,266 \u2154 units. Since we can\u2019t make \u2154 of a unit, we round up to the next highest. This is a different rounding rule than normal because even if the fraction came out to be less than half a unit, we would still round up rather than round down.\r\n\r\nFor instance, if your calculation showed that you needed 999.25 units, you would still have to make 1,000 units in order to have a slight profit instead of a slight loss. In most real cases, none of your numbers will come out exactly even the way they do in the textbook.\r\n\r\nSo, we need 2,267 units in order to break-even. These units have to be split back out into plain and fancy. Our product mix is 80\/20, which is the same as 4:1:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<thead>\r\n<tr class=\"u-sr-only\">\r\n<th scope=\"col\">Unit Type<\/th>\r\n<th scope=\"col\">Total Units<\/th>\r\n<th scope=\"col\">Product Mix Percentage<\/th>\r\n<th scope=\"col\">Product Type Total Units<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td>Sales Mix<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0Classic<\/td>\r\n<td class=\"r\">2,267<\/td>\r\n<td class=\"r\">80.00%<\/td>\r\n<td class=\"r\">1,813.6<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0Ultra<\/td>\r\n<td class=\"r\">2,267<\/td>\r\n<td class=\"r\">20.00%<\/td>\r\n<td class=\"r\">453.4<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,267<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nAgain, because these are books, we can't make partial units, so we would have to round:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<thead>\r\n<tr class=\"u-sr-only\">\r\n<th scope=\"col\">Unit Type<\/th>\r\n<th scope=\"col\">Total Units<\/th>\r\n<th scope=\"col\">Product Mix Percentage<\/th>\r\n<th scope=\"col\">Product Type Total Units<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td>Sales Mix<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0Classic<\/td>\r\n<td class=\"r\">2,267<\/td>\r\n<td class=\"r\">80.00%<\/td>\r\n<td class=\"r\">1,814<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0Ultra<\/td>\r\n<td class=\"r\">2,267<\/td>\r\n<td class=\"r\">20.00%<\/td>\r\n<td class=\"r\">453<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,267<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nNow let\u2019s see how sound our calculation is by plugging this sales mix into our contribution margin model:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\"><caption>BlankBooks, Inc.\r\nSales Mix - break-even point\r\nFor the month ending July 31, 20XX<\/caption>\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Units<\/th>\r\n<th class=\"r\" scope=\"col\">$\/Unit<\/th>\r\n<th class=\"r\" scope=\"col\">Total<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Sales<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Plain<\/td>\r\n<td class=\"r\">1,814<\/td>\r\n<td class=\"r\">$10.00<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 18,140.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Fancy<\/td>\r\n<td class=\"r\">454<\/td>\r\n<td class=\"r\">$14.00<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a06,356.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total sales<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 24,496.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Variable costs<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Plain<\/td>\r\n<td class=\"r\">1,814<\/td>\r\n<td class=\"r\">$8.30<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 15,056.20<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Fancy<\/td>\r\n<td class=\"r\">454<\/td>\r\n<td class=\"r\">$13.30<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a06,038.20<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total variable costs<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 21,094.40<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Contribution Margin<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0\u00a0 3,401.60<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Fixed costs<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a03,400.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Operating income<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1.60<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nThe bottom line is not exactly zero because we rounded the number of units.\r\n\r\nTo calculate for a target profit, simply add the target profit to fixed costs and run the same calculations.\r\n\r\nFor instance, to get a target profit of $5,000 per month, fixed costs + target profit would be $8,400, and the total units needed would be:\r\n<p style=\"padding-left: 60px;\">$8,400 \/ 1.5 = 5,600 units<\/p>\r\nThese units have to be split back out into plain and fancy. Our product mix is 80\/20:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<thead>\r\n<tr class=\"u-sr-only\">\r\n<th scope=\"col\">Unit Type<\/th>\r\n<th scope=\"col\">Total Units<\/th>\r\n<th scope=\"col\">Product Mix Percentage<\/th>\r\n<th scope=\"col\">Product Type Total Units<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td>Sales Mix<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0Classic<\/td>\r\n<td class=\"r\">5,600<\/td>\r\n<td class=\"r\">80.00%<\/td>\r\n<td class=\"r\">4,480<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0Ultra<\/td>\r\n<td class=\"r\">5,600<\/td>\r\n<td class=\"r\">20.00%<\/td>\r\n<td class=\"r\">1,120<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>5,600<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nAnd our contribution margin statement looks like this:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\"><caption>BlankBooks, Inc.\r\nSales Mix - target profit\r\nFor the month ending July 31, 20XX<\/caption>\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Units<\/th>\r\n<th class=\"r\" scope=\"col\">$\/Unit<\/th>\r\n<th class=\"r\" scope=\"col\">Total<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Sales<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Plain<\/td>\r\n<td class=\"r\">4,480<\/td>\r\n<td class=\"r\">$10.00<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 44,800.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Fancy<\/td>\r\n<td class=\"r\">1,120<\/td>\r\n<td class=\"r\">$14.00<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0\u00a015,680.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total sales<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 60,840.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Variable costs<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Plain<\/td>\r\n<td class=\"r\">4,480<\/td>\r\n<td class=\"r\">$8.30<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 37,184.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Fancy<\/td>\r\n<td class=\"r\">1,120<\/td>\r\n<td class=\"r\">$13.30<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 14,896.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total variable costs<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 52,080.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Contribution Margin<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0\u00a0 8,400.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Fixed costs<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0\u00a0 \u00a0 3,400.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Operating income<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a05000.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nAs you can see, once you have the model, especially once you have created it in a spreadsheet or other software program, you can expand it and use it for an incredible array of \u201cwhat-if\u201d analyses.\r\n\r\nHere is a bit more involved example of calculating the break-even point for multiple product lines:\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=6352534&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=QsNAp26mFPI&amp;video_target=tpm-plugin-0m3kbboh-QsNAp26mFPI\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/acct2102LoftyIncMultiProduct_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"acct 2102 Lofty Inc multi product break even CLASS ACTIVITY\" here (opens in new window)<\/a>.\r\n\r\nNow, let\u2019s check your understanding of using the CVP model with multiple product lines.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\n[ohm_question hide_question_numbers=1]217768[\/ohm_question]\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Calculate multiple product break-even points<\/li>\n<\/ul>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-777 alignright\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/17150454\/tom-hermans-9BoqXzEeQqM-unsplash-300x200.jpg\" alt=\"Multiple books on a cart.\" width=\"194\" height=\"129\" \/>To calculate the break-even point for multiple product lines, first determine the <strong>sales mix<\/strong>, which is the percent of overall sales each of the two products represents.<\/p>\n<p>Let\u2019s say that BlankBooks, Inc. is considering adding a second product\u2014a fancier version of the plain journal. Each product will have its own unit selling price and unit variable cost, as follows:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Plain<\/th>\n<th class=\"r\" scope=\"col\">Fancy<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td>Sales price per unit<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 \u00a0\u00a0 10.00<\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 14.00<\/td>\n<\/tr>\n<tr>\n<td>Less: Variable cost per unit<\/td>\n<td class=\"r\">8.30<\/td>\n<td class=\"r\">13.30<\/td>\n<\/tr>\n<tr>\n<td>= Contribution margin per unit<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1.70<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 0.70<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>To calculate break-even, we\u2019ll use a weighted average of the two contribution margins based on the expected product mix that the sales manager and production manager have initially agreed is possible.<\/p>\n<p style=\"padding-left: 60px;\">Plain 2,320 units<\/p>\n<p style=\"padding-left: 60px;\">Fancy 580 units<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\" style=\"height: 96px;\">\n<tbody>\n<tr style=\"height: 12px;\">\n<th class=\"r\" style=\"height: 12px; width: 216.5px;\" scope=\"col\"><\/th>\n<th class=\"r\" style=\"height: 12px; width: 209.5px;\" scope=\"col\">Plain<\/th>\n<th class=\"r\" style=\"height: 12px; width: 199.5px;\" scope=\"col\">Fancy<\/th>\n<th class=\"r\" style=\"height: 12px; width: 209.5px;\" scope=\"col\"><span class=\"u-sr-only\">Total<\/span><\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr style=\"height: 12px;\">\n<td style=\"height: 12px; width: 216.5px;\">Sales price per unit<\/td>\n<td class=\"r\" style=\"height: 12px; width: 209.5px;\">$ \u00a0 \u00a0 \u00a0\u00a0 \u00a0 10.00<\/td>\n<td class=\"r\" style=\"height: 12px; width: 199.5px;\">$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 14.00<\/td>\n<\/tr>\n<tr style=\"height: 12px;\">\n<td style=\"height: 12px; width: 216.5px;\">Less: Variable cost per unit<\/td>\n<td class=\"r\" style=\"height: 12px; width: 209.5px;\">8.30<\/td>\n<td class=\"r\" style=\"height: 12px; width: 199.5px;\">13.30<\/td>\n<\/tr>\n<tr style=\"height: 12px;\">\n<td style=\"height: 12px; width: 216.5px;\">= Contribution margin per unit<\/td>\n<td class=\"r line-single\" style=\"height: 12px; width: 209.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1.70<\/td>\n<td class=\"r line-single\" style=\"height: 12px; width: 199.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 0.70<\/td>\n<\/tr>\n<tr style=\"height: 12px;\">\n<td style=\"height: 12px; width: 216.5px;\">X Sales mix in units<\/td>\n<td class=\"r\" style=\"height: 12px; width: 209.5px;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 2,320.00<\/td>\n<td class=\"r\" style=\"height: 12px; width: 199.5px;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 580.00<\/td>\n<td class=\"r\" style=\"height: 12px; width: 209.5px;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 2,900.00<\/td>\n<\/tr>\n<tr style=\"height: 12px;\">\n<td style=\"height: 12px; width: 216.5px;\">Contribution margin<\/td>\n<td class=\"r line-single line-double\" style=\"height: 12px; width: 209.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 3,944.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\" style=\"height: 12px; width: 199.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0\u00a0\u00a0\u00a0406.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\" style=\"height: 12px; width: 209.5px;\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0\u00a0\u00a0\u00a0 \u00a0 4,350.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr style=\"height: 12px;\">\n<td style=\"height: 12px; width: 216.5px;\">Weighted average contribution margin<\/td>\n<td style=\"height: 12px; width: 209.5px;\"><\/td>\n<td style=\"height: 12px; width: 199.5px;\"><\/td>\n<td class=\"r line-double\" style=\"height: 12px; width: 209.5px;\">$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1.50<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr style=\"height: 12px;\">\n<td style=\"height: 12px; width: 216.5px;\"><\/td>\n<td style=\"height: 12px; width: 209.5px;\"><\/td>\n<td style=\"height: 12px; width: 199.5px;\"><\/td>\n<td style=\"height: 12px; width: 209.5px;\"><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>A <strong>straight average<\/strong> of the two contribution margins would be (1.70 + 0.70) \/ 2 = 1.20, but a simple average like that doesn\u2019t take into account the fact that we are planning to sell four times as many plain journals as we do fancy (expressed as a ratio, it would be 4:1).<\/p>\n<p>A <strong>weighted average<\/strong> takes the different volumes of each product into account by first extending the contribution margins to get the total contribution margin, and then dividing that amount by the total units.<\/p>\n<p style=\"padding-left: 60px;\">The contribution margin for plain journals will be $1.70 X 2,320 = $3,944.00.<\/p>\n<p style=\"padding-left: 60px;\">The contribution margin for fancy journals will be $0.70 X 580 = $406.00.<\/p>\n<p style=\"padding-left: 60px;\">The total contribution margin will be $3,944.00 + $406.00 = $4,350.<\/p>\n<p style=\"padding-left: 60px;\">Divide that by total units of 2,900 and we get a weighted average contribution margin of $1.50.<\/p>\n<p>To get the break-even quantity then, we would divide total fixed costs that need to be covered by the weighted average contribution margin:<\/p>\n<p style=\"padding-left: 60px;\">$3,400 \/ 1.50 = 2266.6666<\/p>\n<p>This is a repeating decimal that is more accurately expressed as a fraction = 2,266 \u2154 units. Since we can\u2019t make \u2154 of a unit, we round up to the next highest. This is a different rounding rule than normal because even if the fraction came out to be less than half a unit, we would still round up rather than round down.<\/p>\n<p>For instance, if your calculation showed that you needed 999.25 units, you would still have to make 1,000 units in order to have a slight profit instead of a slight loss. In most real cases, none of your numbers will come out exactly even the way they do in the textbook.<\/p>\n<p>So, we need 2,267 units in order to break-even. These units have to be split back out into plain and fancy. Our product mix is 80\/20, which is the same as 4:1:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<thead>\n<tr class=\"u-sr-only\">\n<th scope=\"col\">Unit Type<\/th>\n<th scope=\"col\">Total Units<\/th>\n<th scope=\"col\">Product Mix Percentage<\/th>\n<th scope=\"col\">Product Type Total Units<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Sales Mix<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0Classic<\/td>\n<td class=\"r\">2,267<\/td>\n<td class=\"r\">80.00%<\/td>\n<td class=\"r\">1,813.6<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0Ultra<\/td>\n<td class=\"r\">2,267<\/td>\n<td class=\"r\">20.00%<\/td>\n<td class=\"r\">453.4<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,267<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>Again, because these are books, we can&#8217;t make partial units, so we would have to round:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<thead>\n<tr class=\"u-sr-only\">\n<th scope=\"col\">Unit Type<\/th>\n<th scope=\"col\">Total Units<\/th>\n<th scope=\"col\">Product Mix Percentage<\/th>\n<th scope=\"col\">Product Type Total Units<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Sales Mix<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0Classic<\/td>\n<td class=\"r\">2,267<\/td>\n<td class=\"r\">80.00%<\/td>\n<td class=\"r\">1,814<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0Ultra<\/td>\n<td class=\"r\">2,267<\/td>\n<td class=\"r\">20.00%<\/td>\n<td class=\"r\">453<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,267<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>Now let\u2019s see how sound our calculation is by plugging this sales mix into our contribution margin model:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<caption>BlankBooks, Inc.<br \/>\nSales Mix &#8211; break-even point<br \/>\nFor the month ending July 31, 20XX<\/caption>\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Units<\/th>\n<th class=\"r\" scope=\"col\">$\/Unit<\/th>\n<th class=\"r\" scope=\"col\">Total<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Sales<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Plain<\/td>\n<td class=\"r\">1,814<\/td>\n<td class=\"r\">$10.00<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 18,140.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Fancy<\/td>\n<td class=\"r\">454<\/td>\n<td class=\"r\">$14.00<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a06,356.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total sales<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 24,496.00<\/td>\n<\/tr>\n<tr>\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Variable costs<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Plain<\/td>\n<td class=\"r\">1,814<\/td>\n<td class=\"r\">$8.30<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 15,056.20<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Fancy<\/td>\n<td class=\"r\">454<\/td>\n<td class=\"r\">$13.30<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a06,038.20<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total variable costs<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 21,094.40<\/td>\n<\/tr>\n<tr>\n<td>Contribution Margin<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0\u00a0 3,401.60<\/td>\n<\/tr>\n<tr>\n<td>Fixed costs<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a03,400.00<\/td>\n<\/tr>\n<tr>\n<td>Operating income<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1.60<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>The bottom line is not exactly zero because we rounded the number of units.<\/p>\n<p>To calculate for a target profit, simply add the target profit to fixed costs and run the same calculations.<\/p>\n<p>For instance, to get a target profit of $5,000 per month, fixed costs + target profit would be $8,400, and the total units needed would be:<\/p>\n<p style=\"padding-left: 60px;\">$8,400 \/ 1.5 = 5,600 units<\/p>\n<p>These units have to be split back out into plain and fancy. Our product mix is 80\/20:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<thead>\n<tr class=\"u-sr-only\">\n<th scope=\"col\">Unit Type<\/th>\n<th scope=\"col\">Total Units<\/th>\n<th scope=\"col\">Product Mix Percentage<\/th>\n<th scope=\"col\">Product Type Total Units<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Sales Mix<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0Classic<\/td>\n<td class=\"r\">5,600<\/td>\n<td class=\"r\">80.00%<\/td>\n<td class=\"r\">4,480<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0Ultra<\/td>\n<td class=\"r\">5,600<\/td>\n<td class=\"r\">20.00%<\/td>\n<td class=\"r\">1,120<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>5,600<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>And our contribution margin statement looks like this:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<caption>BlankBooks, Inc.<br \/>\nSales Mix &#8211; target profit<br \/>\nFor the month ending July 31, 20XX<\/caption>\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Units<\/th>\n<th class=\"r\" scope=\"col\">$\/Unit<\/th>\n<th class=\"r\" scope=\"col\">Total<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Sales<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Plain<\/td>\n<td class=\"r\">4,480<\/td>\n<td class=\"r\">$10.00<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 44,800.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Fancy<\/td>\n<td class=\"r\">1,120<\/td>\n<td class=\"r\">$14.00<\/td>\n<td class=\"r\">$ \u00a0 \u00a0\u00a015,680.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total sales<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 60,840.00<\/td>\n<\/tr>\n<tr>\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Variable costs<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Plain<\/td>\n<td class=\"r\">4,480<\/td>\n<td class=\"r\">$8.30<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 37,184.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Fancy<\/td>\n<td class=\"r\">1,120<\/td>\n<td class=\"r\">$13.30<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 14,896.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total variable costs<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 52,080.00<\/td>\n<\/tr>\n<tr>\n<td>Contribution Margin<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0\u00a0 8,400.00<\/td>\n<\/tr>\n<tr>\n<td>Fixed costs<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0\u00a0 \u00a0 3,400.00<\/td>\n<\/tr>\n<tr>\n<td>Operating income<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a05000.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>As you can see, once you have the model, especially once you have created it in a spreadsheet or other software program, you can expand it and use it for an incredible array of \u201cwhat-if\u201d analyses.<\/p>\n<p>Here is a bit more involved example of calculating the break-even point for multiple product lines:<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=6352534&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=QsNAp26mFPI&amp;video_target=tpm-plugin-0m3kbboh-QsNAp26mFPI\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/acct2102LoftyIncMultiProduct_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;acct 2102 Lofty Inc multi product break even CLASS ACTIVITY&#8221; here (opens in new window)<\/a>.<\/p>\n<p>Now, let\u2019s check your understanding of using the CVP model with multiple product lines.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p><iframe loading=\"lazy\" id=\"ohm217768\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=217768&theme=oea&iframe_resize_id=ohm217768\" width=\"100%\" height=\"150\"><\/iframe><\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-87\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Sales Mix. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Multiple books on a cart. <strong>Authored by<\/strong>: Tom Hermans. <strong>Provided by<\/strong>: Unsplash. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/unsplash.com\/photos\/9BoqXzEeQqM\">https:\/\/unsplash.com\/photos\/9BoqXzEeQqM<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/about\/cc0\">CC0: No Rights Reserved<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>Acct 2102 Lofty Inc multi product break even CLASS ACTIVITY. <strong>Authored by<\/strong>: Carol Sargent. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/QsNAp26mFPI\">https:\/\/youtu.be\/QsNAp26mFPI<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":364389,"menu_order":11,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Sales Mix\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Acct 2102 Lofty Inc multi product break even CLASS ACTIVITY\",\"author\":\"Carol Sargent\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/QsNAp26mFPI\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"cc\",\"description\":\"Multiple books on a cart\",\"author\":\"Tom Hermans\",\"organization\":\"Unsplash\",\"url\":\"https:\/\/unsplash.com\/photos\/9BoqXzEeQqM\",\"project\":\"\",\"license\":\"cc0\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-87","chapter","type-chapter","status-publish","hentry"],"part":23,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/87","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/wp\/v2\/users\/364389"}],"version-history":[{"count":21,"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/87\/revisions"}],"predecessor-version":[{"id":2342,"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/87\/revisions\/2342"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/pressbooks\/v2\/parts\/23"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/87\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/wp\/v2\/media?parent=87"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=87"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/wp\/v2\/contributor?post=87"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/wp-json\/wp\/v2\/license?post=87"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}