Question: Refer to the information for Peace River Products above Suppose

Refer to the information for Peace River Products above. 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 $18 and a variable cost per unit of $13.
Total fixed cost must be increased by $29,100 (making total fixed cost $114,100). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.
Peace River Products Inc. produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Peace River Products sold 18,000 DVDs and 4,500 equipment sets. Information on the two products is as follows:
Total fixed cost is $85,000.

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 Peace River Products for the coming year. What is the overall contribution margin ratio? The overall break-even sales revenue?
4. Compute the margin of safety for the coming year in sales dollars.

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  • CreatedSeptember 22, 2015
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