Answer:
Cost and Revenue information for the new CD
e. None of the above
Explanation:
a) Data and Calculations:
Variable cost:
Direct material and labor): $2.50/CD
Songwriters' royalties: $0.70/CD
Recording Artists' royalties: $2.00/CD
Total variable cost $5.20/CD
Selling price to CD Distributor: $10.00/CD
Contribution $4.80/CD
Fixed Costs:
Advertising & promotion: $380,000
Sony Records Inc.'s Overhead: $300,000
Total fixed costs $680,000
The break-even point = Fixed costs/Contribution per unit
= $680,000/$4.8 = 142,000 CDs
Knowing they had been selling 100,000 CDs
There is an increase of 42,000 (142,000 - 100,000)
This increase represents a change of 42% = (42,000/100,000 * 100)
The change in sales from 100,000 CDs to 142,000 CDs in order to break-even is a 42% increase. None of the given options from a to d has the answer.
