Multi-Product Break-Even: Use a Realistic Sales Mix
For several products, calculate the contribution from a realistic sales basket and divide fixed costs by that basket contribution. Convert the result to units and revenue using the same mix. A shift towards lower-contribution products raises the sales needed to break even, even if your prices and fixed costs stay unchanged.
What you’ll get from this guide: Build and stress-test a three-product break-even basket.
- Define the mix in units and keep the basket consistent.
- Use variable selling costs as well as product costs.
- Recalculate when mix, capacity or fixed costs change.
This example extends the basic break-even calculation for an owner selling several products. Bring selling prices, variable costs per unit, fixed costs for one period and a plausible mix of sales.
Define one repeatable basket
A basket is a modelling unit, not necessarily a bundle customers buy. Here it contains ten items. Include every cost that changes with those sales, such as packaging and per-order fees where they can be assigned reasonably. Contribution means sales minus those variable costs; it is not the same as gross profit if your cost-of-sales classification differs.
ACCA's multi-product analysis uses total contribution divided by total revenue to calculate the weighted contribution ratio. Its constant-mix assumption matters: different sales proportions produce a different break-even result.
Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax.
| Product | Price | Variable cost | Contribution | Base quantity | Alternative quantity |
|---|---|---|---|---|---|
| A | $50 | $20 | $30 | 5 | 2 |
| B | $30 | $18 | $12 | 3 | 3 |
| C | $20 | $16 | $4 | 2 | 5 |
| Basket totals | Base revenue $380 | Alternative revenue $290 | Base $194 / alternative $116 | 10 items | 10 items |
Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.
Base contribution is 5 × $30 + 3 × $12 + 2 × $4 = $194. Basket revenue is $380. Weighted contribution per item is $19.40 and the contribution-to-sales ratio is $194 ÷ $380 = 51.05% after rounding.
Compare the sales required
With $9,700 monthly fixed costs, the base mix needs $9,700 ÷ $194 = 50 baskets: 500 items and $19,000 revenue. That is 250 A, 150 B and 100 C.
The alternative mix contributes $116 per basket. The mathematical threshold is 83.6207 baskets, approximately 836.21 items and $24,250 revenue. If you plan only in complete ten-item baskets, round up to 84: 840 items, $24,360 revenue and $44 above break-even.
Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax.
| Planning measure | Base mix | Alternative mix |
|---|---|---|
| Fixed costs | $9,700 | $9,700 |
| Contribution per basket | $194 | $116 |
| Whole baskets required | 50 | 84 |
| Whole-basket revenue | $19,000 | $24,360 |
| Contribution less fixed costs | $0 | $44 |
Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.
Rounding the contribution ratio early can distort the answer. Keep full precision in your spreadsheet and round displayed amounts at the end. For a $2,000 target profit, replace $9,700 in the numerator with $11,700; do not add $2,000 to the sales result.
Check that the basket can actually be sold
Compare the implied product quantities with enquiries, stock availability and production time. A target of 250 units of A will not help if demand is only 100. If the mix depends on one scarce machine or specialist, use contribution per bottleneck hour alongside this model.
Treat rent, salaries and other fixed costs as fixed only within the capacity range modelled. A second premises or extra permanent shift changes the calculation. Recheck the actual mix each month with the sales-mix worksheet, then update the forecast.
Where to get help
Ask your accountant to review costs that are partly variable or incurred per order rather than per item. The pricing and profit hub connects the unit-cost worksheets to these operating decisions.
Where to go from here
Sales Rose but Gross Margin Fell? Check Your Sales Mix
Check whether product mix explains the overall margin.
3 min readContribution per Bottleneck Hour: Choose Work When Capacity Is Full
Compare the contribution from your scarce hours.
3 min readMake or Buy? Compare Avoidable Costs and Released Capacity
Continue the “compare operating choices” reading sequence.
3 min read
General information only. This guide doesn't take your personal or business circumstances into account and isn't financial, legal or tax advice. Rates and thresholds change — check the official sources linked in this guide and get qualified advice where your circumstances require it.