Victor Company is a wholesaler of DVDs. The projected after-tax net income for the current year is $120,000, based on a sales volume of 200,000 DVDs. Victor has been selling the DVDs at $16 each. The variable costs consist of the $10 unit purchase price and a handling cost of $2 per unit. Victor’s annual fixed costs are $600,000, and the company is subject to a 40 percent income tax rate.
Management is planning for the coming year when it expects that the unit purchase price will increase 30 percent.

1. Victor Company’s break-even point for the current year is 

(a) 150,000 units, 

(b) 100,000 units, 

(c) 50,000 units, 

(d) 60,000 units, 

(e) some amount other than those given?

2. An increase of 10 percent in projected unit sales volume for the current year would result in an increased after-tax income for the current year of 

(a) $80,000, 

(b) $32,000, 

(c) $12,000, (d) $48,000, 

(e) some amount other than those given?

3. The volume of sales in dollars that Victor Company must achieve in the coming year to maintain the same after-tax net income as projected for the current year if unit selling price remains at $16 is (a) $12,800,000, 

(b) $14,400,000, 

(c) $11,520,000, 

(d) $32,000,000, 

(e) some amount other than those given?

4. To cover a 30 percent increase in the unit purchase price for the coming year and still maintain the current contribution-margin ratio, Victor Company must establish a selling price per unit for the coming year of

(a) $19.60, 

(b) $20.00, 

(c) $20.80, 

(d) $19.00, 

(e) some amount other than those given?