Mikey w. smitty, an emerging rapper, is getting ready to cut his first cd, called "western rap." he is looking for a production company to produce his "western rap" cd. mikey w. smitty is confident that demand for his "western rap" cd will substantially exceed the break even point of 500cds or $7,500 in sales. studio a charges $10,800 to record the cd and $9.50 per cd to duplicate it. studio b charges only $7,500 to record the cd, but $11.50 per cd for duplication. the cd will sell for $21.50.

what is the breakeven point for studio a? (round answer to 2 decimal places, the tolerance is +/- 1). the breakeven point for studio a cds.

compare studio a and b. at what volume of demand should studio a be chosen? (round answer to the nearest whole number, the tolerance is +/- 1).

if than(amount of we should choose studio a.

(i) 900 CDs

(ii) Greater than; $1,650

Explanation:

(1) Break-event point will be when the contribution margin from total sales is equal to fixed costs,

Contribution Margin = Selling price - variable cost

                                  = $(21.5 - 9.5)

                                  = $12

Contribution Margin *Number of CDs sold = $10,800

Break-even point for Studio A = 10,800 ÷ 12

                                                    = 900 CDs

(2) Studio A would be more profitable when the extra profit earned from per unit sale of CD exceeds the extra fixed cost given in Studio A.

Extra Contribution margin in Studio A = $(12-10)

                                                               = $2

Extra Fixed cost in Studio A = $(10,800 - 7,500)

                                               = $3,300

Studio A should be chosen if sales is greater than (3300/2) = $1,650.

answer; enforce the rules;

i'm pretty sure the answer is 60.