Multiple-Product Break-even, Break-Even SalesRevenue
Cherry Blossom Products Inc. produces and sells yoga-trainingproducts: how-to DVDs and a basic equipment set (blocks, strap, andsmall pillows). Last year, Cherry Blossom Products sold 13,500 DVDsand 4,500 equipment sets. Information on the two products is asfollows:
| DVDs | Equipment Sets |
| Price | $8 | $25 |
| Variable cost per unit | 4 | 15 |
Total fixed cost is $77,270.
Suppose that in the coming year, the company plans to produce anextra-thick yoga mat for sale to health clubs. The companyestimates that 9,000 mats can be sold at a price of $17 and avariable cost per unit of $11. Total fixed cost must be increasedby $25,750 (making total fixed cost $103,020). Assume thatanticipated sales of the other products, as well as their pricesand variable costs, remain the same.
Part 1: Sales Mix Instructions and Part 2: Break-Even
1. What is the sales mix of DVDs, equipmentsets, and yoga mats?
3:1:2
2. Compute the break-even quantity of eachproduct.
| Break-even DVDs | units |
| Break-even equipment sets | units |
| Break-even yoga mats | units |
3a. Prepare an income statement for CherryBlossom Products for the coming year. | Cherry Blossom Products Inc. | | Income Statement | | For the Coming Year | | $ | | | | $ | | | | $ |
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3b. What is the overall contribution marginratio? Use the contribution margin ratio to compute overallbreak-even sales revenue. (Note: Round the contributionmargin ratio to the nearest whole percent; round the break-evensales revenue to the nearest dollar.)
| Overall contribution margin ratio | | % |
| Overall break-even sales revenue | $ | |
4. Compute the margin of safety for the comingyear in sales dollars.
$
