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Disk City, Inc. is a retailer for digital video disks. The projected net income for the current year is $1,540,000 based on a
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Answer #1

Answer:

1.) Break even point = Fixed cost / Contribution per unit
=1,540,000 / 21-9-2
=154,000

2.) If 15% increase in sales volume,
Net Income = Contribution (total) - Fixed cost
=[(21-9-2)x 241,500] - 560,000
=$1,855,000

3.) Volume of sales to maintain some profit,
= (Fixed cost + Net income)/New contribution per unit
= (560,000+1,540,000)/21-11.7-2
= 287,671 units

4.) Contribution - margin ratio = (21-9-2)/21 x 100 = 47.62

Selling price is calculated using contribution margin ratio.
Contribution margin ratio = (contribution/sales price) x 100
lets sales price be X
47.62% = (X-11.7-2)/X x 100
0.4762 X = X-13.7
X-0.4762X = 13.7
X=13.7/0.5238
=26.16

1. Break even point = 154000 units
2. Net Income = $1,855,000
3. Volume of sales = 287,671 units
4. Selling price per disk = $26.16

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