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

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

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.

answermarket demand;