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Questions about Breakeven Calculations

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

Solution Summary

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