Question

At the beginning of January, Kesia Records paid $148,950 to acquire the exclusive rights to a new album. It costs them $1.13 to print a copy of this album, which they can sell for $9.75. The following chart shows the sales of that record, along with the overhead expenses of running a record studio, not counting production costs.

Month
Albums Sold
Expenses
Jan.
5,486
$27,714
Feb.
8,191
$21,689
Mar.
4,796
$25,195
Apr.
7,490
$28,766
May
6,272
$24,604
Jun.
5,131
$29,040

In whch month did Kesia Records first break even?
a.
January
b.
March
c.
April
d.
May

Answer 1

First find the contribution per album: 9.75 − 1.13 = $8.62.

Monthly net toward the $148,950 upfront cost = (albums sold × $8.62) − monthly expenses.

Compute cumulatively:
- Jan: 5,486×8.62 − 27,714 = 19,575.32 (cumulative 19,575.32)
- Feb: 8,191×8.62 − 21,689 = 48,917.42 (cumulative 68,492.74)
- Mar: 4,796×8.62 − 25,195 = 16,146.52 (cumulative 84,639.26)
- Apr: 7,490×8.62 − 28,766 = 35,797.80 (cumulative 120,437.06)
- May: 6,272×8.62 − 24,604 = 29,460.64 (cumulative 149,897.70)

Cumulative recoveries exceed $148,950 in May. Answer: d.