solution

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 is___________ 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).

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If sales()________ than(amount of units)_________ we should choose Studio A.

 
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