10S-2. Executives of Studio Recordings Inc. produced the latest compact disc by the Starshine Sisters Band, titled Sunshine/Moonshine. The following cost information In Table 1 pertains to the CD:

Table 1

CD Information	Cost
CD package	$1.25/CD
Songwriters royalties	$0.35/CD
Recording artists royalties	$1.00/CD
Advertising and promotion	$275,000
Studio Recording Inc.s overhead	$250,000
Selling price to the CD distributor	$9.00

1. Calculate the following figures and complete the Table 2 below for Question 1:

Contribution per CD unit

Break-even volume in CD units and dollars

Net profit if one million CDs are sold

Necessary CD unit volume to achieve a $200,000 profit

2. Recalculate the four figures for a situation in which the selling price to the CD distributor is dropped to $8.00 and complete Table 2 for Question 2.

3. Recalculate the four figures for a situation in which Studio Recording Inc.s overhead is reduced to $175,000 and complete Table 2 for Question 3.

Table 2

	Question 1	Question 2	Question 3
Contribution per CD unit	$6.4	$5.4	$6.4
Break-even volume in CD units and dollars	82,031 units $739,436	97,223 units $777,784	70,313 units $632,817
Net profit if one million CDs are sold	$5,875,000	$4,875,000	$5,950,000
Necessary CD unit volume to achieve a $200,000 profit	113,282 units	134,260 units	101,563 units

4. If you were tasked to produce $300,000 minimum in profit, what would your pricing recommendation be? Consider the ethical considerations of your decision. Support your recommendation in one to two paragraphs and complete Table 3 with your new recommendations.

Supporting paragraph(s):

Table 3

Type of Cost	Actual Cost	New Recommendation
CD package	$1.25 per CD	To be completed by student
Songwriters royalties	$0.35 per CD	To be completed by student
Recording artists royalties	$1.00 per CD	To be completed by student
Advertising and promotion	$275,000	To be completed by student
Studio Recording Inc.s overhead	$250,000	To be completed by student
Selling price to the CD distributor	$9.00	To be completed by student