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problem: 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] find out 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] find out 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? 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M921473

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