Question: East Publishing Company is doing an analysis of a proposed new finance textbook. Using the following information, answer [A] through [D].
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Fixed Costs per Edition:
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Development (reviews, class testing, etc.
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18,000
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Copyediting
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5,000
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Selling and Promotion
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7,000
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Typesetting
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40,000
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Total
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70,000
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Variable costs per copy:
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Printing and Binding
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4.20
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Administrative costs
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1.60
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Salespeople's commission (2% of selling price)
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0.60
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Author's royalties (12% of selling price)
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3.60
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Bookstore discounts (20% of selling price)
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6.00
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Total
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16.00
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Projected selling price
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30.00
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The firm's marginal tax rate is 40%.
[A] Calculate the firm's breakeven volume for this book:
In units
In dollar sales
[B] Make a breakeven chart for the textbook.
[C] Find the number of copies East must sell in order to earn an (operating) profit of $21,000 on this book.
[D] Assume East feels that $30 is too high a price to charge for new finance textbook. It has examined the competitive market & determined that $24,000 would be a better selling price. What would the breakeven volume be at this new selling price?