Student Doubts Forum

32.2

32.2

by Filipa Luisdotter Hansén Mesquita -
Number of replies: 1

Hello,

I can't seem to understand which formulas should be used to calculate the BEP (in euros), because none of them gives me the exact answer and I just want to understand why. After calculating the BEP (in units) for A (859.343) and B (rounded to 680) shouldn't it just be, for example for A, 859.343 * 17.5 (SP) ? = 15038.5. Or should I calculate the BEP (in units) for the whole company and then apply the sales mix to be more precise?

Thank you for your attention :)

In reply to Filipa Luisdotter Hansén Mesquita

Re: 32.2

by Madalena dos Santos de Paiva -
Hello Filipa,

In exercises where you need to calculate the Break-Even Point for a company with two or more products, you should always first compute the BEP for the entire company by doing (Total Fixed Costs/ Weighted Average CM unit) and, then, apply the corresponding sales mix percentages to find the BEP for each product individually.

In this case (exercise 32), after computing the average CMunit, you will find that BEP*(whole company) = 1540.0281. Thus, BEP*(A) =1540.0281*55.81% = 859.55056 units and BEP*(B) =1540.0281*44.19% = 680.47753 units.
If you still want to find the BEP in euros for each of the products, you can simply do: BEP**(A) = 859.55056 * SP(a) = 859.55056 * 17.5€ = 15042.135€, and similarly for product B, you just multiply its BEP in units by its selling price.

Hope it was clear!

Madalena Paiva