Join Jim Stice for an in-depth discussion in this video Breakeven analysis for multiple products, part of Breakeven and Cost-Volume-Profit (CVP) Analysis.
- Now, to this point we've dealt strictly…with one product or one service.…We sold one type of seat on an airplane,…we sold one type of meal at McDonald's.…What happens when there are multiple products…or services being offered?…The McDonald's menu has 40-plus options.…On an airplane, there are coach seats,…economy plus, business class, first class,…and who know what other classes they're gonna come up with.…How do I calculate a break-even point,…when there are multiple products?…Well, I'm glad you asked.…While it might be a little more difficult,…it is a lot more valuable,…because multiple products and services are the norm.…
In addition, with computer spreadsheets,…one can change assumptions quickly to determine…how sensitive your solutions are…to the assumptions being made.…Now, we'll do more on sensitivity analysis in a moment.…Let's go back to our McDonald's numbers as an example.…Remember these cost numbers?…Just to keep things simple, and believe me,…we could make it much more complicated,…we will assume that McDonald's sells only meals.…
Jim Stice
Earl Kay Stice
Released
3/1/2016Want to learn more? Learn about three types of accounting—financial, managerial, and income tax—in their Accounting Fundamentals course.
- Breaking down fixed and variable costs
- Pricing a service to cover costs
- Identifying high contribution margins
- Calculating a company's breakeven point
- Conducting breakeven analysis with breakeven equations
- Computing target net income
- Exploring sensitivity analysis
Skill Level Beginner
Duration
Views
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Introduction
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Welcome2m 6s
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1. Importance of Analysis
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2. Types of Costs
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3. Contribution Margin & the CVP Equation
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McDonald's breakeven point4m 54s
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4. The Breakeven Equation
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5. Computing Target Net Income
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6. Sensitivity Analysis
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Conclusion
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Video: Breakeven analysis for multiple products