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1.
value:

10.00 points
 
 

Disk City, Inc. is a retailer for digital video disks. The projected net income for the current year is  $2,320,000 based on a sales volume of 230,000 video disks. Disk City has been selling the disks for $19 each. The variable costs consist of the $5 unit purchase price of the disks and a handling cost of $2 per disk. Disk City’s annual fixed costs are $440,000.

     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.)

 

Required:
1. Calculate Disk city’s break-even point for the current year in number of video disks. (Round your answer to the nearest whole number.)

 

  Break-even point
Required:
1. How many units must the company sell to break even if Model 6754 is selected? (Do not round intermediate calculations and round your final answer to the nearest whole number.)

  Break-even point
2-a.

Calculate the net income of the two systems if sales and production are expected to average 44,000 units per year. (Omit the “$” sign in your response.)

  Net Income
  Model 6754

3.

Assume Model 4399 requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $450,000 and will be depreciated over a five-year life by the straight-line method. How many units must Corrigan sell to earn $961,000 of income if Model 4399 is selected? As in requirement (2), sales and production are expected to average 44,000 units per year. (Do not round intermediate calculations and round your final answer to the nearest whole number.)

  Required sales
4.

Ignoring the information presented in part (3), at what volume level will the annual total cost of each system be equal? (Round your answer to the nearest whole number.)

  Volume level  by $  by
b.  Effect of an increase in fixed administrative costs on the unit contribution margin.
c.  Effect of an increase in the unit contribution margin on net income.
d.  Effect of a decrease in the number of units sold on the break-even point.

rev: 10_30_2013_QC_38310, 02_27_2014_QC_46037

 
7.
value:

10.00 points
 
 

Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows:

  Product Type Sales Price Invoice Cost Sales Commission
  High-quality $ 500   $ 275   $ 25  
  Medium-quality   300     135     15  

 

Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $65,000. (In the following requirements, ignore income taxes.)

Required:
1.

Compute the unit contribution margin for each product type. (Omit the “$” sign in your response.)

 

  Bicycle Type Unit
Contribution Margin
  High-quality

 

    • Posted: 6 years ago
    • Due: 
    • Budget: $
      5