hello and good day our topic for today is still cost volume profit analysis or cvp analysis this is the second part of the discussion in cvp analysis and in this video i'm going to discuss the multi-product break-even analysis multi-product break even analysis multi-product break-even analysis is used when a company produces and sells two or more products in our previous topic which is single product break-even analysis that is used when a company produces and sells only one product just like in single product break even analysis this is a multi-product break even analysis we are going to compute for the following first the break-even point in vessels and second the break even point in units let's start with break even point in pesos it's a single product break even analysis and break even point in pesos i fixed costs divided by contribution margin ratio that is fc divided by cmr some multi-product break even analysis except that the denominator is w-a-c-m-r or weighted average contribution margin ratio so nothing you weighted average nang cmr for each product next is break even point in units it's a single product break even analysis and break even point in units i fixed costs divided by contribution margin per unit fc divided by cm per u some multi-product break even analysis gonna then accept that the denominator is w a c m per u or weighted average contribution margin per unit so cocooning not then you weighted average non-contribution margin per unit for each product let us now apply the formulas by answering a problem abc company sells products a b and c data about the three products are as follows given and selling price per unit variable cost per unit contribution margin per unit sales in units total sales in units and the total fixed costs requirements requirement number one determine the break-even point in pesos and requirement number two determine the break-even point in units before we answer requirement number one a compute muna national sales in pesos for each product parama computing sales in pesos multiply nathan young selling price per unit sales in units so for product a 100 pesos times 1000 units that is equal to 100 000 pesos for product b 120 pesos times 2 000 units that is equal to 240 000 pesos and for product c 50 pesos times 5 000 units that is equal to 250 000 pesos so all in all the total sales in pesos is 590 000 pesos requirement number one is determine the break-even point in pesos and formula i break even point in pesos is equal to fixed costs divided by weighted average contribution margin ratio since given us a problem young fixed costs and problems are young weighted average contribution margin ratio cocooning weighted average non-contribution margin ratio to do this kailang and nothing multiply your contribution margin ratio for each product is a sales mix an obayon sales mix sales mix is the relative combination of quantities of sales of various products that make up the total sales of a company for purposes of computing the weighted average contribution margin ratio the sales mix is determined using the sales in pesos so weighted average contribution margin ratio palagi young magbi base sales in pesos as i said earlier parama compute weighted average contribution margin ratio and multiply not then your contribution margin ratio for each product is a sales mix one of the ways to compute the contribution margin ratio is contribution margin per unit divided by selling price per unit so for product a and contribution margin per unit i am 40 pesos and selling price per unit i 100 pesos 40 pesos divided by 100 pesos that is equal to 40 percent so product bin and contribution margin per unit i 30 pesos and selling price per unit i 120 pesos 30 pesos divided by 120 pesos that is equal to 25 so product cinnamon and contribution margin per unit i 10 pesos at unselling price per unit i 50 pesos 10 pesos divided by 50 pesos that is equal to 20 next sales mix in order to compute for the sales mix get the sales in pesos for each product and divide it by the total sales in pesos so sales in pesos for each product divided by the total sales in pesos for product a and sales in pesos i 100 000 pesos and total sales in pesos i 590 000 pesos 100 000 pesos divided by 590 000 pesos that is equal to 16.95 percent for product b 240 000 pesos divided by 590 000 pesos that is equal to 40.68 for product c 250 000 pesos divided by 590 000 pesos that is equal to 42.37 percent next in multiply nothing you see mr sales mix 40 times 16.95 percent that is equal to 6.78 25 times 40.68 that is equal to 10.17 percent 20 times 42.37 percent that is equal to 8.47 percent average contribution margin ratio 6.78 plus 10.17 percent plus 8.47 that is equal to 25.42 at this point we can now compute for the break-even point in pesos break-even point in pesos is equal to fixed costs divided by weighted average contribution margin ratio and fixed costs i 101 680 pesos at a weighted average contribution margin ratio i 25.42 hundred one thousand six hundred eighty pesos divided by twenty five point forty two percent that is equal to four hundred thousand pesos so our answer in requirement number one is four hundred thousand pesos on break even point in pesos i four hundred thousand pesos and buying ibiza behind four hundred thousand pesos in a break-even point in pesos now four hundred thousand pesos the abc company to break even a four hundred thousand pesos that means net income and at the same time waladin recall that at break-even point there is no profit and there is no loss angdanong joins uh 400 000 pesos and sales so product a to break even ilandapat unsails so product b to break even atlanta sales mix for each product so for product a 400 000 pesos times 16.95 400 000 pesos times point ninety five percent that is equal to sixty seven thousand eight hundred pesos that means the path on sales so product a i sixty seven thousand eight hundred pesos to break even for product b four hundred thousand pesos times forty point sixty eight percent that is equal to one hundred sixty two thousand seven hundred twenty pesos that means dapat on sales sub product bi 162 thousand seven hundred twenty pesos to break even for product c 400 000 pesos times 42.37 that is equal to 169 000 four hundred eighty pesos that means the pattern sales so product see i 169 thousand four hundred eighty pesos to break even next requirement number two determine the break-even point in units on formula and break-even point in units i fixed costs divided by weighted average contribution margin per unit since given fixed costs um problem on the lung a young computation and weighted average contribution margin per unit weighted average non-contribution margin per unit to do this kelang and nothing multiply your contribution margin per unit for each product the sales mix for purposes of computing the weighted average contribution margin per unit the sales mix is determined using the sales in units so kapag and hinahana a weighted average contribution margin per unit mcbase cayosa sales in units young contribution margin per unit given ayansa problem 40 pesos for product a 30 pesos for product b and 10 pesos for product c in order to compute for the sales mix get the sales in units for each product and divide it by the total sales in units for product a and sales in units are 1 000 units at total sales in units i 8 000 units 1 000 units divided by 8 000 units that is equal to 12.5 for product b 2 000 units divided by 8 000 units that is equal to 25 for product c 5 000 units divided by 8 000 units that is equal to 62.5 percent next multiply not then you see ampere you need the sales mix 40 pesos times 12.5 percent that is equal to 5 pesos 30 pesos times 25 that is equal to 7.5 pesos 10 pesos times 62.5 that is 6.25 pesos average contribution margin per unit five pesos plus 7.5 pesos plus 6.25 pesos that is equal to 18.75 pesos at this point we can now compute for the break even point in units break-even point in units is equal to fixed costs divided by weighted average contribution margin per unit and fixed costs are 101 680 pesos at unweighted average contribution margin per unit i 18.75 pesos 101 680 pesos divided by 18.75 pesos that is equal to 5422.93 units since units it is better kung it round off a whole number that is 5423 units and that is the answer in requirement number two 5423 units and break even point in units i 5423 units the abc company 5423 to break event units five thousand four hundred twenty three units the sales mix product so for product a five thousand four hundred twenty three units times 12.5 percent 5423 units times 12.5 percent that is equal to 678 units 678 units to break even for product b 5423 times 25 that is equal to 1356 units 1356 units now product b to break even and for product c 5 423 units times 62.5 percent that is equal to 3389 units 3389 units product c to break even