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 17,920 DVDs and 4,480 equipment sets. Information on the two products is as follows: DVDs Equipment Sets Price $7.90 $25.10 Variable cost per unit 3.90 14.80 Total fixed cost is $97,310.

1. What is the sales mix of DVDs and equipment sets? Select 4:1

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

The break-even quantity for DVDs is? 27,412 .

The break-even quantity for equipment sets is? 6,853 .

Answer 1

Answer:

1)

Given :

• DVD's = 17,920 last year
• Equipment sets = 4,480 last year

Sales mix of DVD and equipment ses =  17,920 : 4480 = 4:1

Therefore the sales mix ratio is 4:1

2)

Compute combined CM margin :

Particulars	DVD	Equipment set
Sale price	$ 7.90	$ 25.10
Variable cost	$ 3.90	$ 14.80
Contribution per unit	$7.90-$3.90= $ 4	$ 25.10 - $ 14.80 =$10.3

Therefore , combined contribution margin = $ 4+$ 10.3 = $14.3

Given fixed cost = $ 97,310

Calculation break even quantity of DVD and equipment sets:

Break even quantity	= Fixed cost / Combined contribution margin = $ 97,310 / 14.3 = 6,805	6,805 units
Break even quantity of DVD	= 6,805 * 4/5 = 5,444	5,444 units
Break even quantity of equipment sets	= 6,805*1/5 = 1,361	1,361 units