1.
Break even point = Fixed costs / Contribution margin per unit
Break even point = $500,000 / $11 ($18-7) = 45,455 video disks
2.
Net income = (270,000+20%) * $11 - 500,000
Net income = 324,000*$11 - 500,000
Net income = $3,564,000 - 500,000 = $3,064,000
3.
Contribution margin per unit = $18 - 6 (5+20%) - 2 = $10
Desired sales volume = Fixed cost + Projected net income / Contribution margin ratio
Desired sales volume = $500,000 + 2,470,000 / 55.56%($10/$18*100)
Desired sales volume = $5,345,572
4.
Current contribution margin ratio = $11/18*100 = 61.11%
Current variable cost ratio = 100 - 61.11 = 38.89%
Selling price per disk for coming year = $8(6 + 2) / 38.89% = $20.57 per disk
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