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    Questions about Breakeven Calculations

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    Executives of Studio Recordings, Inc, produced the latest compact disc by the Starshine Sisters Band, titled Sunshine/Moonshine. The following cost information pertains to the new CD:
    CD package and disc (direct material and labor) $1.25/CD
    Songwriters' royalties $0.35/CD
    Recording artists' royalties $1.00/CD
    Advertising and promotion $275,000
    Studio Recordings, Inc.'s overhead $250,000
    Selling price to CD distributor $9.00

    Calculate the following:
    a. Contribution per CD unit
    b. Break-even volume in CD units and dollars
    c. Net profit if 1 million CDs are sold
    d. Necessary CD unit volume to achieve a $200,000 profit

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    Solution Summary

    The solution explains how to calculate the breakeven point and the units needed for a given target income.