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 13,500 DVDs and 4,500 equipment sets. Information on the two products is as follows: Total fixed cost is $84,920. Refer to the information for Cherry Blossom Products on the previous page. 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 four 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.

BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter 7, Problem 44E
Textbook Problem

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 13,500 DVDs and 4,500 equipment sets. Information on the two products is as follows:

Chapter 7, Problem 44E, Cherry Blossom Products Inc. produces and sells yoga-training products: how-to DVDs and a basic

Total fixed cost is $84,920.

Refer to the information for Cherry Blossom Products on the previous page. 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. 1. What is the sales mix of DVDs, equipment sets, and yoga mats?
  2. 2. Compute the break-even quantity of each product.
  3. 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 four decimal places; round the break-even sales revenue to the nearest dollar.)
  4. 4. Compute the margin of safety for the coming year in sales dollars.

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Chapter 7 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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