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Eastman Publishing Company is considering publishing a paperback textbook on spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and production setup is estimated to be $80,000. Variable production and material costs are estimated to be $3 per book. Demand over the life of the book is estimated to be 4,000 copies. The publisher plans to sell the text to college and university bookstores for $20 each.

a. What is the break-even point?

b. What profit or loss can be anticipated with a demand of 4,000 copies?

c. With a demand of 4,000 copies, what is the minimum price per copy that the publisher must charge to break-even?

d. If the publisher believes that the price per copy could be increased to $29.95 and not affect the anticipated demand of 4,000 copies, what action would you recommend? What profit or loss can be anticipated?

Accounting Basics, Accounting

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