Multi-Product Firms: Mathematical Derivation of Composite Break-Even Point

Abstract

Break-even analysis is a popular tool used for the purpose of planning and decision making. In a single product setting, the computations are simple and easy to understand. But in a multi-product setting, the calculations are based on a crucial assumption, i.e., the sales mix does not change. In this article, an attempt is made to present the mathematical derivation of composite break-even point in units as well as monetary terms.