The influence diagram below is drawn based on the following question: Eastman Pu

Question

The influence diagram below is drawn based on the following question: 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 $160,000. Variable production and material costs are estimated to be $6 per book. Demand over the life of the book is estimated to be 4000 copies. As a result, they plan to publish 4000 copies. The publisher plans to sell the text to college and university bookstores for $46 each. Build an Excel model based on the influence diagram. (That is. use the variables shown on the diagram in an Excel model.) With a demand of 3500 copies, what is the minimum price per copy that the publisher must charge to break even?

Explanation / Answer

a)

b) let the minimum price per copy = X

at Break even

sales - variable cost= Fixed cost

(X- 6) 3500 = 160000

X- 6 = 45.71

X = $51.71

Copies plan to publish 4000 Selling price 46 Sale = 184000 Less- variable cost 24000 Contribution = sales - variable cost 160000 Less- fixed cost 160000 profit/(loss) 0

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