Question
Multiple-Product Break-even, Break-Even Sales Revenue Cherry Blossom Products Inc. produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small
Multiple-Product Break-even, Break-Even Sales Revenue
Cherry Blossom Products Inc. produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Cherry Blossom Products sold 13,500 DVDs and 4,500 equipment sets. Information on the two products is as follows:
DVDs | Equipment Sets | |
Price | $8 | $25 |
Variable cost per unit | 4 | 15 |
Total fixed cost is $85,500.
Suppose that in the coming year, the company plans to produce an extra-thick yoga mat for sale to health clubs. The company estimates that 9,000 mats can be sold at a price of $21 and a variable cost per unit of $12. Total fixed cost must be increased by $28,500 (making total fixed cost $114,000). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.
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