Question

Can someone help me solve this? I initially tried it but got everything wrong so I scrapped my answers and want to start fresh.

If someone could explain it in a step by step manner that would be very helpful as there are a couple of similar problems I need to solve.

Thanks!

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 $ 00 $25 Variable cost per unit 15 Total fixed cost is $73,440. 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 $15 and a variable cost per unit of $9. Total fixed cost must be increased by $24,480 (making total fixed cost $97,920). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.

Answer 1

Total DVDs sold: 13500

Total equipment sets sold: 4500

Fixed Cost: 73440. Apportioning this in total units, we get

Fixed Cost of DVD=> 73440*13500/(13500+4500) = 55080

Fixed Cost of Equipment sets=> 73440*4500/(13500+4500) = 18360.

1. Sales Mix=> 13500 : 4500 : 9000 = 3:1:2

2. BEP units = fixed cost/( selling price per unit - variable cost per unit)

	units
DVDs	55080/(8-4) = 13770
Equipment set	18360/(25-15) = 1836
Yoga Mats	24480/(15-9)= 4080

3.

Sales:
DVDs	13500*8 = 108000
Equip. sets	4500*25 = 112500
Yoga Mats	9000*15 = 135000	355500
Variable Costs
DVDs	13500*4 = 54000
Equip. sets	4500 * 15 = 67500
Yoga Mats	9000*9 = 81000	202500
Contribution		153000
Fixed Cost		97920
Operating income		55080

3b. Overall Contribution Margin: 153000/355500*100 = 43%

Overall Break even sales revenue: 97920/43*100 = 227562

4. Margin of Safety = Actual sales - BEP Sales => 355500 - (13770*8 + 1836*25 + 4080*15) = 138240

Please comment in case of any query regarding the solution.