Problems

All applicable Problems are available in Connect.

Disk City, Inc., is a retailer for digital video disks. The projected net income for the current year is $$200,000$ based on a sales volume of $200,000$ video disks. Disk City has been selling the disks for $$16$ each. The variable costs consist of the $$10$ unit purchase price of the disks and a handling cost of $$2$ per disk. Disk City's annual fixed costs are $$600,000.$

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.$)$

Fonnect

Problem $7-34$

Basic CVP Relationships; Retailer

$(L07-1,7-2,7-4)$

$2.$ Net income: $$280,000$

$318$

Chapter $7$ Cost$-$Volume$-$Profit Analysis

Required:

Calculate Disk City's break$-$even point for the current year in number of video disks.

What will be the company's net income for the current year if there is a $10$ percent increase in projected unit sales volume?

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 $$16?$

In order to cover a $30$ 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?

Build a spreadsheet: Construct an Excel spreadsheet to solve requirements $1,2,$ and $3$ above. Show how the solution will change if the following information changes: the selling price is $$17$ and the annual fixed costs are $$640,000.$