Barry Carter is considering opening a video store. He wants to estimate the number of DVDs he must sell to break even. The DVDs will be sold for $13.98 each, variable operating costs are $10.48 per DVD, and annual fixed operating costs are $73,500.
a. Find the operating breakeven point in number of DVDs.
b. Calculate the total operating costs at the breakeven volume found in part a.
c. If Barry estimates that at a minimum he can sell 2,000 CDs per month, should he
go into the video business?
d. How much EBIT will Barry realize if he sells the minimum 2,000 DVDs per
month noted in part c?
