DATA INPUT
Current Year's Net Income
$200,000
Current Year's Sales Volume
200,000
Sales price per DVD
$16
Variable cost per unit purchase price
$10
Handling cost per unit
$2
Annual fixed costs
$600,000
Expected increase in unit purchase price
30%
SOLUTION
1. Breakeven point in units, using the equation approach:
$16 X

$10
+
$2 X

$600,000
=
0
$4 X
=
$600,000
X
=
$600,000
/
$4
X
=
150,000 units
2. Net income if there is a 10% increase in projected unit sales volume:
New projected sales volume
=
200,000
x
110%
=
220,000 units
Net income
=
220,000
x
$16

$12

$600,000
=
220,000
x
$4

$600,000
=
$880,000

$600,000
=
$280,000
3. Volume of sales to maintain same net income if selling price remains at $16:
Target net income
=
$200,000 (from original problem data)
New disk purchase price
=
$10
x
130%
=
$13
Volume of sales dollars required:
Volume of sales dollars required
=
fixed expenses + target net profit/ contributionmargin ratio
Volume of sales dollars required
=
600,000
+
200,000
/
((
16

13

2 )
/
$16 )
=
800,000
/
0.0625
=
$12,800,000