Question
Detroit Disk, Inc. is a retailer for digital video disks. The projected net income for the current year is$2,500,000 based on a sales volume of
Detroit Disk, Inc. is a retailer for digital video disks. The projected net income for the current year is$2,500,000 based on a sales volume of 300,000 video disks. Detroit Disk has been selling the disks for $16.00 each. The variable costs consist of the $4.00 unit purchase price of the disks and a handling cost of $2.00 per disk. Detroit Disks annual fixed costs are $500,000.Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes. | |
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