As you explore Break Even Point (BEP) calculations, you will initially encounter it as if it were applied to a single product. However, the challenge lies in translating theory into practical application, especially when dealing with a diverse product portfolio.

If you are selling multiple products, the quest for precision in determining the BEP becomes paramount. So, let's embark on this journey with an example:

**STEP 1: SALES BY UNITS**

Determine the number of units sold within a specified time frame, for example, a one-year period. Include all SKUs that were sold.

Product A: 321 units

Product B: 420 units

Product C: 550 units

Note that adding more SKUs will expand the table.

**STEP 2: TOTAL UNITS **

Calculate the total units sold. Initially, it might seem unusual to sum units that may not be in the same category, but this is necessary for calculating percentage participation.

321 + 420 + 550 = 1,291 units

**STEP 3: PERCENTAGE OF PARTICIPATION**

Calculate the percentage of units for each product by dividing the units sold per product by the total units, then multiply by 100.

% Product A: (321 / 1,291) * 100 = 24.86%

% Product B: (420 / 1,291) * 100 = 32.53%

% Product C: (550 / 1,291) * 100 = 42.60%

**STEP 4: SALES PRICE PER UNIT (SPPU)**

Determine the price per unit for each product.

SPPU Product A: $1000

SPPU Product B: $900

SPPU Product C: $700

**STEP 5: COST PER UNIT (CPU**)

Determine the cost per unit, which requires calculations based on your purchase cost to supply your business.

CPU Product A: $400

CPU Product B: $320

CPU Product C: $280

**STEP 6: WEIGHTED AVERAGE PRICE**

Use the weighted average formula.

($1000 * 24.86%) + ($900 * 32.53%) + ($700 * 42.60%) = $840

In Microsoft Excel, use the SUMPRODUCT formula, but ensure you select the row with the percentage of participation and the corresponding sales price per unit. Use the ROUNDUP formula.

**STEP 7: WEIGHTED AVERAGE COST**

Again, use the weighted average formula.

($400 * 24.86%) + ($320 * 32.53%) + ($280 * 42.60%) = $323

In Microsoft Excel, use the SUMPRODUCT formula by selecting the row with the percentage of participation and cost per unit. Use the ROUNDUP formula.

**STEP 8: FIXED COST**

Determine your total fixed costs for the period.

$500,000

**STEP 9: CONTRIBUTION MARGIN**

Calculate the contribution margin by subtracting the cost per unit from the sales price per unit.

CM Product A: $1000 - $400 = $600

CM Product B: $900 - $320 = $580

CM Product C: $700 - $280 = $420

**STEP 10: WEIGHTED AVERAGE CONTRIBUTION MARGIN**

Once more, apply the weighted average formula.

($600 * 24.86%) + ($580 * 32.53%) + ($420 * 42.60%) = $517

In Microsoft Excel, use the SUMPRODUCT formula with the percentage of participation and contribution margin. Use the ROUNDUP formula.

**STEP 11: BREAK EVEN POINT (BEP)**

Calculate the Break Even Point by dividing the fixed cost by the weighted average contribution margin. Use the ROUNDUP formula.

BEP: $500,000 / $517 =

**968 units**

**STEP 12: BEP REVENUE**

Calculate the Breakeven Point revenue, multiplying the BEP by the weighted average price.

968 * $840 = $813,120

**STEP 13: BEP BY PRODUCT**

Calculate the Break Even Point for each product by multiplying the BEP by the respective percentage of participation.

BEP Product A: ($968 * 24.86%) = 241 units

BEP Product B: ($968 * 35.53%) = 315 units

BEP Product C: ($968 * 42.60%) = 412 units

The BEP analysis helps understand where you can start to get revenue without losing money. The main goal is always to surpass this point. In the example, you need to sell **968 units of all products** to cover the fixed costs and start to generate income.

**If you require assistance developing an effective business plan and digital strategy, feel free to reach out for **__JuanXcel__**'s personalized guidance and support.**

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