Question: A company is doing an examine of a proposed new finance textbook.
Fixed cost per edition
|
Development (reviews class testing and so on)
|
18,000
|
|
Copyediting
|
5,000
|
|
Selling and promotion
|
7000
|
|
Typesetting
|
40,000
|
|
Total
|
70,000
|
|
Variable Costs per copy
|
|
Printing and binding
|
4.2
|
|
Administration cost
|
1.6
|
|
Salesperson's commission (2% of selling price)
|
0.6
|
|
Author's royalties (12% of selling cost)
|
3.6
|
|
Bookstore discounts (20% of selling cost)
|
6
|
|
Total
|
$16.00
|
|
Projected selling price
|
$30.00
|
Marginal tax rate is 40 percent
Calculate the breakeven volume in units and in dollar sales
Develop a breakeven chart for the textbook
Calculate the number of copies the must be sold in order to earn an operating profit of
$21,000 on this book
Assume the company feels that $30.00 is too high a price to charge for the new finance textbook. $24.00 would be a better selling price. Determine the breakeven volume be at this new selling price?