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The Excellent DVD Company sells DVDs for $62 each. Manufacturing cost is $22.70 per DVD; marketing...

  1. The Excellent DVD Company sells DVDs for $62 each. Manufacturing cost is $22.70 per DVD; marketing costs are $7.75 per DVD. The fixed cost of preparing the DVDs is $227 300. Capacity is 20 000 DVDs.
  1. Determine the break-even volume and break-even revenue.
  2. Compute the break-even as a percent of the production capacity.
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Answer #1

Total Fixed cost = 227300

Selling price = 62

Variable cost = (22.70+7.75)

= 30.45

A) Break up volume = Fixed cost / (Selling price per unit - vriable cost per unit)

= 227300 / ( 62 - 30.45)

= 227300 / 31.55

= 7204.43740095

Number of Units = 7205 [Rounded to next integer]

Break even volume Revenue = Number of units * Selling price

= 7205 *62

Break even volume revenue = $446710

B) Break even as percent to production cpacity = 7205 / 20000

Break even as percent to production cpacity = 36.025%

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