Computation of Break even points.
East Publishing Company is doing an analysis of a proposed new finance textbook. Using the following data, 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 company's marginal tax rate is 40%.
a) Determine the company's breakeven volume for this book:
1. In units
2. In dollar sales
b) Develop a breakeven chart for the textbook.
c) Determine the number of copies East must sell in order to earn an (operating) profit of $21,000 on this book.
d) Suppose East feels that $30 is too high a price to charge for the new finance textbook. It has examined the competitive market and determined that $24,000 would be a better selling price. What would the breakeven volume be at this new selling price?