What will be the companys net income for the current year
Course:- Accounting Basics
Reference No.:- EM13601488

Assignment Help
Assignment Help >> Accounting Basics

Disk City, Inc. is a retailer for digital video disks. The projected net income for the current year is $2,300,000 based on a sales volume of 260,000 video disks. Disk City has been selling the disks for $20 each. The variable costs consist of the $7 unit purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are $560,000.
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.)

1. Calculate Disk city's break-even point for the current year in number of video disks. (Round your answer to the nearest whole number.)
Break-even point units

2.What will be the company's net income for the current year if there is a 15 percent increase in projected unit sales volume? (Omit the "$" sign in your response.)
Net income $

3.What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $20? (Do not round intermediate calculations and round your final answer to nearest dollar amount. Omit the "$" sign in your response.)
Volume of sales $

4.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? (Do not round intermediate calculations and round your final answer to nearest dollar amount. Omit the "$" sign in your response.)

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Accounting Basics) Materials
If the company maintains a constant 7 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?
Mayaguez Corporation provides its officers with bonuses based on net income. For 2014, the bonuses total $350,000 and are paid on February 15, 2015. Prepare Mayaguez's Decem
Zeppo Supply Company manufactures cleaning products. During the year, the company spent $600,000 on chemicals and $728,000 on conversion costs. Overhead is applied at a rate
Justify the method of writing off the production-volume variance to the cost of goods sold, as compared to allocating the variance to work-in-process and finished goods inve
Smart Investors, Inc., is expected to pay a dividend of $4.20 in the upcoming year. Dividends are expected to grow at the rate of 8% per year. The riskless rate of return is 4
An auditor is required to obtain a sufficient understanding of each of the components of an entity's system of internal control to plan the audit of the entity's financial s
The following data give the selling price, squarefootage, number of bedrooms, and age of housesthat have sold in a neighborhood in the past 6months. Develop three regression
Bloomfield Bakers accounts for its investment in Clor Confectionary under the equity method. Bloomfield carried the Clor investment at $150,000 and $165,000 at December 31m