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problem: East Publishing Company is doing an analysis of a proposed new finance textbook. Using the following information, answer [A] through [D].

Fixed Costs per Edition:

Development (reviews, class testing, etc.

18,000

Copyediting

5,000

Selling and Promotion

7,000

Typesetting

40,000

Total

70,000

Variable costs per copy:

 

Printing and Binding

4.20

Administrative costs

1.60

Salespeople's commission (2% of selling price)

0.60

Author's royalties (12% of selling price)

3.60

Bookstore discounts (20% of selling price)

6.00

Total

16.00

Projected selling price

30.00

The firm's marginal tax rate is 40%.

[A] find out 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?

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