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Economics w10 $5.00
October 10, 2020
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Advanced Electronics manufactures DVDs and sells them directly to retailers who typically sell them for $20. Retailers take a 40% margin based on the…

Advanced Electronics manufactures DVDs and sells them directly to retailers who typically sell them for $20. Retailers take a 40% margin based on the retail selling price. Advanced’s cost information is as follows:

DVD package and disc                                  $2.50/DVD

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Royalties                                                        $2.25/DVD

Advertising and promotion                            $500,000

Overhead                                                       $200,000

Calculate the following:

  1. contribution per unit and contribution margin
  2. break-even volume in DVD units and dollars
  3. volume in DVD units and dollar sales necessary if Advanced’s profit goal is 20% profit on sales.
  4. net profit if 5 million DVDs are sold

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