New Basic Break-even Analysis Models for Multiple Product Firms

Abstract

This paper aims at proposing a new basic model for the computation of break-even points for multiple product firms. The key and new component of the newly proposed break-even models was an equivalent unit conversion factor. We have demonstrated that this new computational method of break-even point for multiple product firms provided a unique break-even solution for any product chosen as a based product on both the basic model. Their unique solutions indicate that the newly proposed break-even models are robust. We also demonstrated that the newly proposed break-even model gives us the true break-even for any combination of the products or sales mix, assumed constant in the traditional basic break-even model. These newly proposed break-even models are thus applicable in the actual operation of the multiple product firm with a basic cost structure.