Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Disk City, Inc. is a retailer for digital video disks. The projected net income for the current year is $2,000,000 based on a sales volume

image text in transcribed

Disk City, Inc. is a retailer for digital video disks. The projected net income for the current year is $2,000,000 based on a sales volume of 240,000 video disks. Disk City has been selling the disks for $19 each. The variable costs consist of the $7 unit purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are $400,000. 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.) Required: 1. Calculate Disk City'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 10 percent increase in projected unit sales volume? 3. What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $19? (Do not round intermediate calculations. Round your final answer to the nearest whole number.) 4. 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 Disk City establish for the coming year? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) units 1. Break-even point 2. Net income 3. Volume of sales 4. Selling price per disk

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Sector Accounting And Auditing In Europe The Challenge Of Harmonization

Authors: I. Brusca, E. Caperchione, S. Cohen, F Manes Rossi

2015th Edition

1137461330, 978-1137461339

More Books

Students also viewed these Accounting questions

Question

1. Describe the factors that lead to productive conflict

Answered: 1 week ago