Advanced Electronics manufactures DVDs and sells them directly to retailers who typically sell them for $20. Retailers take a 40 percent margin based on the retail selling price. Advanced's cost information is as follows:
DVD package and disc
$2.50/DVD
Royalties
$2.25/DVD
Advertising and promotion
$500,000
Overhead
$200,000
Calculate the following:
a. contribution per unit and contribution margin
b. break-even volume in DVD units and dollars
c. volume in DVD units and dollar sales necessary if Advanced's profit goal is 20 percent
profit on sales
d. net profit if 5 million DVDs are sold