Disk City, Inc. is a retailer for digital video disks. Theprojected net income for the current year is $2,770,000 based on asales volume of 290,000 video disks. Disk City has been selling thedisks for $23 each. The variable costs consist of the $10 unitpurchase price of the disks and a handling cost of $2 per disk.Disk City’s annual fixed costs are $420,000.
Management is planning for the coming year, when it expects thatthe unit purchase price of the video disks will increase 30percent. (Ignore income taxes.)
Required:
- Calculate Disk City’s break-even point for the current year innumber of video disks. (Round your final answer up tonearest whole number.)
- What will be the company’s net income for the current year ifthere is a 10 percent increase in projected unit sales volume?
- What volume of sales (in dollars) must Disk City achieve in thecoming year to maintain the same net income as projected for thecurrent year if the unit selling price remains at $23? (Donot round intermediate calculations. Round your final answer to thenearest whole number.)
- In order to cover a 30 percent increase in the disk’s purchaseprice for the coming year and still maintain the currentcontribution-margin ratio, what selling price per disk must DiskCity establish for the coming year? (Do not roundintermediate calculations. Round your final answer to 2 decimalplaces.)
