Question: Executives of Studio Recordings, Inc. produced the latest compact disc by the Starshine Sisters Band, titled Sunshine /Moonshine. The following cost information pertains to the

Executives of Studio Recordings, Inc. produced the latest compact disc by the Starshine Sisters Band, titled Sunshine /Moonshine. The following cost information pertains to the new CD:

CD package and disc (direct material and labor) .. $1.25/CD

Songwriters’ royalties .............. $0.35/CD

Recording artists’ royalties ............ $1.00/CD

Advertising and promotion ............ $275,000

Studio Recordings, Inc.’s overhead ........ $250,000

Selling price to CD distributor ............. $9.00

Calculate the following:

a. Contribution per CD unit

b. Break-even volume in CD units and dollars

c. Net profit if 1 million CDs are sold

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