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 15 percent increase in projected unit sales volume? Disk City, Incorporated, is a retailer for digital video disks. The projected net income for the current year is $2,130,000 based on asales volume of 230,000 video disks. Disk City has been selling the disks for $17 each. The variable costs consist of the $4 unitpurchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are $400,000.Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 20 percent.(Ignore income taxes.) a. Calculate Disk City's break-even point for the current year in number of video disks.Note: Round your final answer up to nearest whole number.b. What will be the company's net income for the current year if there is a 15 percent increase in projected unit sales volume?c. What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for thecurrent year if the unit selling price remains at $17?Note: Do not round intermediate calculations. Round your final answer to the nearest whole number.d. In order to cover a 20 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?Note: Do not round intermediate calculations. Round your final answer to 2 decimal places.

Answered: Disk City, Incorporated, is a retailer…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

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 15 percent increase in projected unit sales volume?

Disk City, Incorporated, is a retailer for digital video disks. The projected net income for the current year is $2,130,000 based on a
sales volume of 230,000 video disks. Disk City has been selling the disks for $17 each. The variable costs consist of the $4 unit
purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are $400,000.
Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 20 percent.
(Ignore income taxes.)

a. Calculate Disk City's break-even point for the current year in number of video disks.
Note: Round your final answer up to nearest whole number.
b. What will be the company's net income for the current year if there is a 15 percent increase in projected unit sales volume?
c. 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 $17?
Note: Do not round intermediate calculations. Round your final answer to the nearest whole number.
d. In order to cover a 20 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?
Note: Do not round intermediate calculations. Round your final answer to 2 decimal places.

Expert Solution

Step 1: Introduction

CVP analysis includes concept of break even point, break even point is the point of sale where there is no profit no loss situation.

Contribution margin is difference between selling price and variable cost.

We are permitted to solve three subparts kindly ask last subpart in different question.

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions