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 $88,560.

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 $19 and a variable cost per unit of $12. Total fixed cost must be increased by $29,520 (making total fixed cost $118,080). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.

Compute the break-even quantity of each product.

Break-even DVDsunits ?

Break-even equipment setsunits ?

Break-even yoga matsunits ?

Overall contribution margin ratio 41%

Overall break-even sales revenue $288,000

4.Compute the margin of safety for the coming year in sales dollars.

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