Peace River Products Inc. manufactures and sells yoga-training products: how to DVDs and basic equipment set (blocks, strap, and small pillows). Last year, Peace River Products sold 18,000 DVDs and 4,500 equipment sets. Information on two products is given below:
DVDS Equipment Sets
Price $8 $25
Variable cost per unit 4 16
Total fixed cost is $85,000.
Refer to information for Peace River Products above. Assume that in coming year, company plans to make the extra-thick yoga mat for sale to health clubs. Company evaluates that 9,000 mats can be sold at the price of $18 and the variable cost per unit of $13. Total fixed cost should be increased by $29,100 (making total fixed cost $114,100). Suppose that expected sales of other products, and their prices and variable costs, remain same.
i) Find sales mix of DVDs, equipment sets, and yoga mats?
2. Calculate break-even quantity of every product.
3. Create the income statement for Peace River Products for coming year. Find overall contribution margin ratio? Overall break-even sales revenue?
4. Calculate margin of safety for coming year in sales dollars.