You have been asked to analyze the profitability of releasing a new music album by a hair
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Question:
You have been asked to analyze the profitability of releasing a new music album by a hair metal band from 1980s. You have been able to collect the following information:
- The band is expecting a one-time royalty payment of $12 million.
- The fixed cost of producing a CD version of the book is $1.5 million.
- The variable cost of producing each CD is $2.
- Each CD will be sold for $11.99.
- The record label expects to sell 1 million CDs.
- The fixed cost of producing an LP is $0.5 million.
- The variable cost of producing each LP is $4.
- Each LP is sold for $21.99.
- LP sales are expected to be ¼ of the CD sales.
Determine how many CDs must be sold to break even. SHOW ALL OF YOUR STEPS.
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