Question: West Publishing Company is doing an analysis of a proposed new finance text book. Use the following information, answer a through d.
Fixed costs per edition:
|
Development
|
$18,000
|
|
Copyediting
|
$5,000
|
|
Selling/Promo
|
$7,000
|
|
Typesetting
|
$40,000
|
|
Total
|
$70,000
|
Variable costs per copy:
|
Printing/bind
|
$4.20
|
|
|
Admin costs
|
$1.60
|
|
|
Sales comm.
|
$0.06
|
2% of selling price
|
|
Royalties
|
$3.60
|
12% of selling price
|
|
Discounts
|
$6.00
|
20% of selling price
|
|
Total
|
$16.00
|
|
Projected selling price $30.00
Tax rate is 40 percent
[A] Calculate the firm's breakeven volume for the book
i. in unit's
ii. in dollar sales
[B] Make a breakeven chart for the text book
[C] Calculate the number of copies they must sell to earn an operating profit of $21,000 on this book
[D] Assume East feels that $30 is too high a price to charge. It examined the market and determined that $24.00 would be better. Determine the break even volume be at the new price?