Breakeven and Cost-Volume-Profit with Taxes

question 2

Essay

Breakeven and Cost-Volume-Profit with Taxes
DisKing Company is a retailer for video disks.The projected after-tax net income for the current year is $120,000 based on a sales volume of 200,000 video disks.DisKing has been selling the disks at $16 each.The variable costs consist of the $10 unit purchase price of the disks and a handling cost of $2 per disk.DisKing's annual fixed costs are $600,000 and DisKing is subject to a 40 percent income tax rate.
Management is planning for the coming year,when it expects that the unit purchase price of the video disks will increase 30 percent.
Required:
a.Calculate DisKing Company's break-even point for the current year in number of video disks.
b.Calculate the increased after-tax income for the current year from an increase of 10 percent in projected unit sales volume.
c.If the unit selling price remains at $16,calculate the volume of sales in dollars that DisKing Company must achieve in the coming year to maintain the same after-tax net income as projected for the current year.

Comprehend the impact of private information on economic decisions and market efficiency.

Explain the role of correlated and independent risks in investment strategies and risk reduction.

Understand the concept of adverse selection and its impact on the market.

Grasp the concept of moral hazard and how it influences individual and business actions.

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Definitions:

Family Businesses

Businesses owned and operated by multiple family members, often passed down from one generation to the next.

Shareholders

Individuals or entities that own share(s) of stock in a corporation, thus holding a portion of the ownership and rights to profits.

Disadvantages

are the unfavorable or negative aspects of a situation, plan, or condition that may cause difficulties or reduce chances of success.

Life Cycle

The series of changes in the life of an organism, including birth, growth, reproduction, and death; it can also refer to similar stages in the development of products or organizations.