Detroit Disk, Inc. is a retailer for digital video disks. The projected net inco
ID: 2447718 • Letter: D
Question
Detroit Disk, Inc. is a retailer for digital video disks. The projected net income for the current year is $2,710,000 based on a sales volume of 290,000 video disks. Detroit Disk has been selling the disks for $21.00 each. The variable costs consist of the $8.00 unit purchase price of the disks and a handling cost of $2.00 per disk. Detroit Disk’s annual fixed costs are $480,000.
1.) Calculate Detroit Disk’s break-even point for the current year in number of video disks. (Round your final answer up to nearest whole number.)
2.) What will be the company’s net income for the current year if there is a 20 percent increase in projected unit sales volume?
3.) What volume of sales (in dollars) must Detroit Disk achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $21.00 but the unit purchase price of the disks increases by 20 percent as expected? (Do not round intermediate calculations and round your final answer to the nearest whole number.)
4.) Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 20 percent. (Ignore income taxes.)
In order to cover a 20 percent increase in the disk’s purchase price for the coming year and still maintain the current contribution-margin ratio, what selling price per disk must Detroit Disk establish for the coming year? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Detroit Disk, Inc. is a retailer for digital video disks. The projected net income for the current year is $2,710,000 based on a sales volume of 290,000 video disks. Detroit Disk has been selling the disks for $21.00 each. The variable costs consist of the $8.00 unit purchase price of the disks and a handling cost of $2.00 per disk. Detroit Disk’s annual fixed costs are $480,000.
1.) Calculate Detroit Disk’s break-even point for the current year in number of video disks. (Round your final answer up to nearest whole number.)
2.) What will be the company’s net income for the current year if there is a 20 percent increase in projected unit sales volume?
3.) What volume of sales (in dollars) must Detroit Disk achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $21.00 but the unit purchase price of the disks increases by 20 percent as expected? (Do not round intermediate calculations and round your final answer to the nearest whole number.)
4.) Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 20 percent. (Ignore income taxes.)
Explanation / Answer
Detroit Disk BEP Analysis Current Situation Sales Vol 290,000 Details Amt /Unit Total Amount Sales Revenue 21 6,090,000 Variable cost of disk 8 2,320,000 Variable cost of handling 2 580,000 a Contribution Margin 11 3,190,000 b Annual Fixed Cost 480,000 Net Operating Income 2,710,000 Ans 1 Break even Point in units =Fixed cost/Unit Contribution=480000/11= 43,636 no disks Situation 2. BEP Analysis Sales Vol +20%= 348,000 Details Amt /Unit Total Amount Sales Revenue 21 7,308,000 Variable cost of disk 8 2,784,000 Variable cost of handling 2 696,000 a Contribution Margin 11 3,828,000 b Annual Fixed Cost 480,000 Ans 2. Net Operating Income 3,348,000 Situation 3. BEP Analysis Sales Vol ? Details Amt /Unit Total Amount Net Income required 2,710,000 Total Fixed cost 480,000 Contribution required 3,190,000 Revised Income statement Unit Contribution calculation Details Amt /Unit Sales Revenue 21 Variable cost of disk 10 Variable cost of handling 2 Contribution Margin 9 Ans 3. Required Vol of sales= Contribution required/ Unit Contribution Margin =3,190,000/9= 339,362 Units Situation 4. Unit Contribution calculation Details Amt /Unit a Contribution Margin Required /unit 11 b Variable cost of disk 10 c Variable cost of handling 2 Ans 4. Sales Price rquired =a+b+c 23 per unit So required sales price is $23/unit
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.