CONTRIBUTION MARGIN RATIO, BREAK-EVEN SALES REVENUE, AND MARGIN OF SAFETY FOR MULTIPLE-PRODUCT FIRM Sonora Company produces and sells pottery chimineas (small clay outdoor fireplaces).

The chimineas come in three models: small basic, large basic, and carved (ornately shaped and carved). In the coming year, Sonora sold 30,000 small basic models, 50,000 large basic models, and 10,000 carved models. Information on the three models is as follows:

Small Large Carved Price $120 $200 $350 Variable cost per unit 70 150 275 Total fixed costs are $446,500.

Required:

. What is the sales mix of small basic to large basic to carved models?

. Compute the break-even quantity of each product.

. Prepare an income statement for Sonora for the coming year. What is the overall contribution margin ratio? The overall break-even sales revenue?

. Compute the margin of safety for the coming year.

Exercise