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 18,000 DVDs and 4,500 equipment sets. Information on the two products is as follows:________

DVDs Equipment
Sets
Price $11 $15
Variable cost per unit 4 7
Total fixed cost is $84,000.
What is the equation to compute the break-even quantity of each product? The break-even on DVDs and the break-even on equipment sets?
I know the equation for break eve would be:
Fixed Costs/price - variable unit cost

Answer 1

Cerry Blossom Product Inc

the break-even quantity = Fixed cost / contribution margin

contribution margin on the other hand is sales price minus variable cost

compoutation of contribution margin

DVD Equipment

$ $

Price 11 15

variable cost 4 7

7 8

unit sold 18,000 4,500

sales ratio 4 1

weigheted average contribution margin = ($7*4) + ($8*1)

4 + 1

= $36/5

= $7.2

Overall break-even quantity = $84,000/$7.2

= 11,667

Break-even unit :

DVD = (4 * 11,667)/ 5

= 9,334units

Equipment sets = ( 1 * 11,667)/5

= 2,333 units

Step-by-step explanation:

this question is on multi- products.

The overall break-even quantity of the firm will be computed first using the weighted average contribution margin of the firm and common fixed cost.

The break-even quantity will later be divided between the two product based on their sales ratio.