CVP Analysis with Multiple Products

Concept

Sales Mix

When a company sells more than one product, CVP analysis must account for the sales mix — the relative proportion of each product sold. The weighted average CM is used for break-even calculations.

Example

Weighted Average CM

Product A: CM = $30, makes up 60% of sales. Product B: CM = $10, makes up 40% of sales. Weighted Avg CM = ($30 × 0.60) + ($10 × 0.40) = $18 + $4 = $22 per unit.

Key Point

Assumption

CVP analysis with multiple products assumes the sales mix remains CONSTANT. If the mix shifts toward lower-margin products, the break-even point increases even if total volume stays the same.

Margin of Safety & Operating Leverage

Back to module →

Ready to test your knowledge?

Practice questions from this module to reinforce what you learned.

Practice Questions