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.)
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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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?
![1. Break-even point
2. Net income
3. Volume of sales
4. Selling price per disk
36,364 units
$ 2,509,500](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb87f551d-3fc5-4766-9e3a-b14ac4833b45%2F1914c043-9c94-4cb2-8cca-812230d94529%2Fd3n5oe7_processed.png&w=3840&q=75)
Transcribed Image Text:1. Break-even point
2. Net income
3. Volume of sales
4. Selling price per disk
36,364 units
$ 2,509,500
![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.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb87f551d-3fc5-4766-9e3a-b14ac4833b45%2F1914c043-9c94-4cb2-8cca-812230d94529%2Fndiwau8_processed.png&w=3840&q=75)
Transcribed Image Text: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.)
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