Question

Multiple-Product Break-even

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 8,980 DVDs and 4,490 equipment sets. Information on the two products is as follows:

	DVDs	Equipment Sets
Price	$8.30	$24.70
Variable cost per unit	3.50	14.60

Total fixed cost is $74,860.

Required:

1. What is the sales mix of DVDs and equipment sets?

Select  

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

The break-even quantity for DVDs is .

The break-even quantity for equipment sets is .

Answer 1

Sales Units Selling price Per unit Variable Cost Per unit Contribution Margin Per unit Sales Mix := 8980/13470, 4490/13470 = 2:1 CM* sales mix Weighted Average Unit Contribution Fixed cost Equipment DVDs Sets 8980 4490 8.3 24.7 3.5 14.6 4.8 10.1 67% 17% 3.2 1.6833333 4.883333 74860 4.8833333 74860 15330 (Units) Weighted Average Unit Contribution Fixed Cost Compute the Break Even point in Units Break Even in Unit Sales =( Fixed Cost / CM Per unit) Answers Sales Mix = 2:1 Break Even Point DVD (15330*2/3) Equipment (15330*1/3) (2:1) 10220 Units 2555 Units