[mgonciarz]

Here are my questions

The break even point is the level of sales at which

I am confused with that, I would say

I woud say total contribution margin equals total fixed formula

Am I right

Other is

For the break even point for a multi-product company, I am assuming that selling prices are constant and the sales mix is constant,

Am I right?? Thanks - M

[ArcSine]

M, you're certainly on the right track. The break-even point (whether expressed as Revenue, or as Units Sold), is just what it sounds like: It's the point at which the company's net profit is zero--the company is neither making a profit, nor incurring a loss. That's just another way of saying that the Total Revenues are exactly equal to the Total Costs, at that particular level of Sales.

In the classic scenario, a company's cost structure contains two components: Fixed Costs, which is a single amount that doesn't vary with Sales; and Variable Costs, which are usually expressed in terms of dollars-per-unit.

When you play around with the numbers in this classic scenario, you'll quickly see that a company "breaks even" when its Total Contribution Margin exactly equals its Fixed Costs (not fixed "formula").

For the multi-product situation it's not absolutely required that the product mix remain constant, but then your break-even analysis becomes much more complicated. From your question, I'm pretty confident that your text, at this stage of the game, is assuming that the product mix holds constant.

Hope that helped a little.