Thread: Break-even Point - Per Unit

When you're determining the breakeven point on multiple products, there are 2 ways to go about this when looking to use the contribution margin per unit: 1)The basket approach, and 2)The weighted average approach. The basket approach tells us to figure out what percentage of "units" we sell of each product, and create a basket of those goods. If there are 75% chairs sold and 25% couches sold at the furniture store, the basket would contain 3 chairs, and 1 couch. Then, you multiply by the contribution margin for each, so if a chair's cm is $20 and a couch's cm is $40, 3(20)+1(40)=100. In your case, fixed costs are $10,000. So, $10,000/100 = 100. That means you have to sell 100 baskets. Each basket is made up of 3 chairs, and a couch, so you have to sell 300 chairs and 100 couches. At this point, you would substitute the units in and figure out the total revenue.