Question

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 18,200 DVDs and 4,550 equipment sets. Information on the two products is as follows:

	DVDs	Equipment
		Sets
Price	$7.60	$24.60
Variable cost per unit	3.60	15.10

Total fixed cost is $84,150.

	Required:
1.	What is the sales mix of DVDs and equipment sets?
2.	Compute the break-even quantity of each product. 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

1) Calculation of sales mix:
Total number of products=18200+4550=22750
DVDs= 18200/22750*100=80%
Equipment sets=4550/22750*100=20%
Sales mix= DVDs: Equipment sets= 80:20
2) Calculation of break even quantity of each product:
Contribution per unit= Selling price- variable cost per unit
DVDs= 7.60-3.60=$4
Equipment sets=24.60-15.10=$9.50
Total contribution per unit=4*0.80+9.50*0.20=$5.10
Break even point= Fixed cost/ contribution per unit
= 84150/5.10=16500
Break-even quantity for DVDs= 16500*0.80=13200
Break-even quantity for equipment sets=16500*0.20=3300