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Pricing Assessment 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

Pricing Assessment

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

  1. CD package

$1.30/CD

  1. Songwriters royalties

$0.40/CD

  1. Recording artists royalties

$1.10/CD

  1. Advertising and promotion

$280,000

  1. Studio Recording Inc.s overhead

$260,000

  1. Selling price to the CD distributor

$9.25

  1. Calculate the following figures and complete the Table 2 below for Question 1:
    1. Contribution per CD unit
    2. Break-even volume in CD units and dollars
    3. Net profit if one million CDs are sold
    4. 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
  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

Table 2

Question 1

Question 2

Question 3

  1. Contribution per CD unit

Enter figure

Enter figure

Enter figure

  1. Break-even volume in CD units and dollars

Enter figure

Enter figure

Enter figure

  1. Net profit if one million CDs are sold

Enter figure

Enter figure

Enter figure

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

Enter figure

Enter figure

Enter figure

  1. 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

  1. CD package

$1.30 per CD

To be completed by student

  1. Songwriters royalties

$0.40 per CD

To be completed by student

  1. Recording artists royalties

$1.10 per CD

To be completed by student

  1. Advertising and promotion

$280,000

To be completed by student

  1. Studio Recording Inc.s overhead

$260,000

To be completed by student

  1. Selling price to the CD distributor

$9.25

To be completed by student

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