CH7-44 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: Questions are attached. Please ensure to answer only Question 4 : COMPUTE THE MARGIN OF SAFETY FOR THE COMING YEAR IN SALES DOLLARS - THANK YOU DVDs Equipment Sets Price $8 $25 Variable cost per unit 4 15 Total fixed cost is $110,100. 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 $20 and a variable cost per unit of $11. Total fixed cost must be increased by $36,700 (making total fixed cost $146,800). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.
CH7-44 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: Questions are attached. Please ensure to answer only Question 4 : COMPUTE THE MARGIN OF SAFETY FOR THE COMING YEAR IN SALES DOLLARS - THANK YOU DVDs Equipment Sets Price $8 $25 Variable cost per unit 4 15 Total fixed cost is $110,100. 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 $20 and a variable cost per unit of $11. Total fixed cost must be increased by $36,700 (making total fixed cost $146,800). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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CH7-44
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: Questions are attached. Please ensure to answer only Question 4 : COMPUTE THE MARGIN OF SAFETY FOR THE COMING YEAR IN SALES DOLLARS - THANK YOU
| DVDs | Equipment Sets | |
| Price | $8 | $25 |
| Variable cost per unit | 4 | 15 |
Total fixed cost is $110,100.
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 $20 and a variable cost per unit of $11. Total fixed cost must be increased by $36,700 (making total fixed cost $146,800). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.
Transcribed Image Text:Part 1: Sales Mix Instructions and Part 2: Break-Even
Part 3a: Income Statement
1. What is the sales mix of DVDS, equipment sets, and yoga mats? 3a, Prepare an income statement for Cherry Blossom Products for the coming year.
3:1:2
Cherry Blossom Products Inc.
2. Compute the break-even quantity of each product.
Income Statement
For the Coming Year
Break-even DVDS
36,700 units
Sales
$ 400,50
Break-even equipment sets
14,680 units
Total variable cost
220,50
Break-even yoga mats
16,311 units
Contribution margin
180,00
Total fixed cost
146,80
Operating income
$ 33,200
Part 3b: Contribution Margin Ratio and Part 4: Margin of Safety
3b. 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 the nearest whole percent; round the break-even sales revenue to the nearest dollar.)
Overall contribution margin ratio
45
%
Overall break-even sales revenue
326,222
4. Compute the margin of safety for the coming year in sales dollars.
74,278
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