Executives of Studio Recording,Inc, produced the lastest compact disc by the Sta
ID: 2670502 • Letter: E
Question
Executives of Studio Recording,Inc, produced the lastest compact disc by the Starshine Sisters Band Sunshine/Moonshine. The following cost information pertains to the new cd.Cd packages and disc(direct material and labor) $1.25/CD
Songwriters royalties $0.35/CD
Recording artists royalties $1.00/CD
Advertising and promotion $275,000
Studio Recording, Inc, overhead $250,000
Selling price to CD distributor $9.00
Calculate the contribution per CD unit, break-even volume in CD units and dollars, net profit if 1 million CDs are sold and necessary CD unit volume to achieve a $200,000 profit.
Explanation / Answer
Executives of Studio Recording,Inc, produced the lastest compact disc by the Starshine Sisters Band Sunshine/Moonshine. The following cost information pertains to the new cd.
Cd packages and disc(direct material and labor) $1.25/CD
Songwriters royalties $0.35/CD
Recording artists royalties $1.00/CD
Advertising and promotion $275,000
Studio Recording, Inc, overhead $250,000
Selling price to CD distributor $9.00
Calculate the contribution per CD unit, break-even volume in CD units and dollars, net profit if 1 million CDs are sold and necessary CD unit volume to achieve a $200,000 profit.
contribution per CD unit = 6.40 DOLLARS
=9- 2.6= 6.40
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break-even volume in CD units = 82,032
= (275,000 +250000) / 6.40 =82,032
break-even volume in CD units and dollars, =82,032 X 9= 738 288 DOLLARS
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= 1000000 X 6.40= 6,400,000 -525,000= 5,875,00 -NET RPOFIE
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113,282 SOLD
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