Problem - Multiple-Product Breakeven, Break-Even Sales Revenue
Refer to the information for Cherry Blossom Products above. 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 $28,980 (making total fixed cost $113,900). 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. Compute the break-even quantity of each product.
3. Prepare an income statement for Cherry Blossom Products for the coming year. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. (Note: Round the contribution margin ratio to three decimal places; round the break-even sales revenue to the nearest dollar.)
4. Compute the margin of safety for the coming year in sales dollars.