There are two broad approaches to break-even analysis in setting with multiple products. The first approach is to first allocate the common fixed costs to individual products on some basis, and then conduct break-even analysis on a product-by-product basis. The second approach is to assume a certain “product mix” and compute the break-even point without having to allocate common fixed costs. Which method is theoretically more appealing and why?

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Answer The product mix approach is more realistic and theoretically appealing compared to ... View the full answer