What the author is trying to show about accounting and economics using this question:
The Central Publishing Co. is about to publish its first textbook. It is now in the process of estimating costs. It expects to produce 10,000 copies during its first year. The following costs have been estimated to correspond to the expected copies:
a. Paper Stock = $8000
b. Typesetting = $15000
c. Printing = $50000
d. Editing = $20000
e. Advertising = $12000
f. Shipping = $10000
In addition to above costs, the company expects to pay the authors a 13% royalty and its salespeople a 3% commission, based upon the publisher's price of $48/textbook. Some of the preceding costs are fixed and others are variable. The average variable costs are expected to be constant. Although 10, 000 copies is its projected volume, the book could sell anywhere between 0 and 20,000 copies.