Question

Executives of Studio Recordings, INC produced the latest compact disc by the Starshine Sisters Band, titled Sunshine.Moonshine. The Following cost information pertains. to the new cd:

CD Package and Disc $1.25/cd
Songwriters Royalties $0.35/cd
Recording Artists Royalties $1.00/cd
Ad and Promotion $275,000
Studio Recording Inc Overhead $250,000
Selling Price to CD Distributor $9.00


Calculate the necessary CD Unit Volume To Achieve a $200,000 profit...

Answer 1

Let the required CD unit volume be x, then
Total cost = 1.25x + 0.35x + x + 275000 + 250000 = 2.6x + 525000
Total revenue = 9x

Profit = Total revenue - Total cost = 9x - (2.6x + 525000) = 200000
6.4x - 525000 = 200000
6.4x = 200000 + 525000 = 725000
x = 725000 / 6.4 = 11328.125

Therefore, to achieve a profit of $200,000; 11,329 Cd's has to be sold.