photoking transfers old home movies (primarily supper 8 film and VHS tape to DVD

Question

photoking transfers old home movies (primarily supper 8 film and VHS tape to DVD, the current year's projected sales volume is 2,000 units the company has been selling the services for an average of $ 200 per record DVD, variabl cost consist of the $ 2 purchase price of the blank DVD and a $ 2 handling and packaging cost, photoking's annual committed costs for this process equipment and labor are $ 400, 000

please answer A and B

A calculate photoking's break even point for the current year in units

b    management is planning for the comming year when is expect unit sales volume to increased by 10 percent, the unit purchase price of the disk s drope by 30 percent, and the committed cost to increse by 10 percent, what is the new break even volum in units? what is the volum of units and dollar sales must photoking chieve in the coming year to make a profit of $ 40,000 if it is average selling price remain at $200 ?

Explanation / Answer

A. the break even point= Fixed cost/contribution

contribution is sales - variable cost

here 200-4=196

BEP units = 400000/196

=2041unitsApprox rounded of

B. When DVD cost gone down that means now total varable cost s 1.4+2=3.4 and contrbution is 200-3.4 = 196.6

NEW BEP units is =440000/196.6

=2238 units APPROX

For earning 40000 profit in current situation Formula is

(Fixed cost + profit )/Contribution

440000+40000/196.6

2442.5 units Approx

You can cross check

selling price 2442.5*200

=488300

Variable cost =2442.5*3.4

=8300

And fixed cost is 440000

So total cost will be 448300

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