Answer:
Details on Costs and Revenue associated with the new CD
e. None of the alternatives given
Explanation:
a) Data and Calculations:
Variable expenses:
Direct materials and labor: $2.50/CD
Royalties for songwriters: $0.70/CD
Royalties for recording artists: $2.00/CD
Overall variable cost $5.20/CD
Price for CD Distributor: $10.00/CD
Contribution margin $4.80/CD
Fixed Costs:
Costs for advertising & promotion: $380,000
Overhead for Sony Records Inc.: $300,000
Total fixed expenses $680,000
To find the break-even point = Total fixed costs/Contribution per unit
= $680,000/$4.8 = 142,000 CDs
Given that they have sold 100,000 CDs
The increase is 42,000 (142,000 - 100,000)
This growth represents a 42% change = (42,000/100,000 * 100)
The shift in sales from 100,000 to 142,000 CDs required to reach break-even is a 42% increase. None of the available choices from a to d provide the correct answer.
