Removing the Constraining Assumption of No Joint Products in Breakeven Analysis
Enyi Patrick Enyi

Abstract
One of the major assumptions of the break-even concept is that there is only one product line. This assumption though, has helped in perfecting the existing mathematical model for finding the breakeven point of a firm and for analyzing the implications of a firm’s activity level on its costs and profits, has seriously reduced and hindered considerably the use of the concept in analyzing the economic implications of volume in a multi-product business organization of today’s competitive business environment. The need to reverse this trend prompted the researcher to using the Reversed Contribution to Sales Ratio (RCSR) approach to perfect a new formula for analyzing multi products break-even points. This paper uses a fairly-easy-to-understand approach to present the new model. The test result using the product moment correlation coefficient revealed a perfect inverse relationship between the normal Contribution to Sales Ratio (CSR) and the associated RCSR for individual products thus proving that the new model was highly effective and precise in the allocation of the joint-products break-even sales to the individual member products. The implication of this development is that the assumption of ‘only one product line’ no longer hold in breakeven analysis and hence, recommended for pedagogical purposes.

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