Integrated Process for Multiple Product Breakeven Analysis and Limiting Resource Allocation in Profit Planning

Collins C Ngwakwe
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Collins C Ngwakwe: University of Limpopo, Polokwane, South Africa

Oblik i finansi, 2024, issue 4, 44-50

Abstract: Breakeven analysis for multiple products can help managers understand how each product or service contributes to a company's overall profitability and performance. It can help identify the most and least profitable products or services and how to optimize the company's sales mix and pricing strategy. This paper presents a step-by-step process of an integrated multiple product analysis for the derivation of multiple product breakeven point coupled with the process of allocation of limiting factor in multiple product cases. Accordingly, the author used a hypothetical case of the Integrated Juicy Products PTY to demonstrate an integrated process of conducting multiple product breakeven analysis, derivation of multiple breakeven point and separate breakeven point of each product among the multiple products. Additionally, the research presents insight into the procedural allocation of a limiting factor of production to optimize product mix and profit contribution. In this study, the procedural analysis demonstrates the optimum usage of the limiting factor and the attendant optimum production in the multiple mix of products, culminating in the optimum contribution margin. To buttress the optimization implication of limiting factor allocation, it concludes by presenting a comparison of total contribution using equal allocation of limiting factor to accentuate the fact that in times of limiting factor, the optimum contribution is attainable with optimal allocation of limiting factor of production through the prioritizing of the products with higher contribution per unit of limiting factor. The paper offers insights for practical application in multiple product companies and case teaching and research in business schools.

Keywords: breakeven analysis; profit planning; multiple products company; optimum production; integrated process; limiting factor allocation; margin of safety; contribution margin (search for similar items in EconPapers)
JEL-codes: G30 M11 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:iaf:journl:y:2024:i:4:p:44-50

DOI: 10.33146/2307-9878-2024-4(106)-44-50

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