Multiple-Product Break-Even, Break-Even Sales Revenue

Switzer Company produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Switzer sold 10,000 DVDs and 5,000 equipment sets. Information on the two products is as follows:

	DVDs	Equipment Sets
Price	$12	$15
Variable cost per unit	4	6

Total fixed costs are $70,000.

Suppose that in the coming year, Switzer plans to produce an extra-thick yoga mat for sale to health clubs. The company estimates that 20,000 mats can be sold at a price of $18 and a variable cost per unit of $13. Fixed costs must be increased by $48,350 (making total fixed costs of $118,350). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.

Required:

1. What is the sales mix of DVDs, equipment sets, and yoga mats? 2:1:4

2. Compute the break-even quantity of each product.

Break-even DVDs
Break-even equipment sets
Break-even yoga mats

3. Prepare an income statement for Switzer for the coming year.

Switzer Company
Income Statement
For the Coming Year
Sales
Total variable cost
Contribution margin
Total fixed cost
Operating income

What is the overall contribution margin ratio? The overall break-even sales revenue? (Round the contribution margin ratio to the nearest whole percent; round the break-even sales revenue to the nearest dollar.)

Overall contribution margin ratio		%
Overall break-even sales revenue	$

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