Eastman Publishing Company is considering publishing an electronic textbook on s

Question

Eastman Publishing Company is considering publishing an electronic textbook on spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and website construction is estimated to be $170,000. Variable processing costs are estimated to be $6 per book. The publisher plans to sell access to the book for $52 each.

(a) Build a spreadsheet model in Excel to calculate the profit/loss for a given demand. What profit can be anticipated with a demand of 3,600 copies? For subtractive or negative numbers use a minus sign. $ (b) Use a data table to vary demand from 1000 to 6000 increments of 200 to test the sensitivity of profit to demand. Breakeven occurs where profit goes from a negative to a positive value, that is, breakeven is where total revenue = total cost yielding a profit of zero. In which interval of demand does breakeven occur? (i) Breakeven appears in the interval of 3,200 to 3,400 copies. (ii) Breakeven appears in the interval of 3,600 to 3,800 copies. (iii) Breakeven appears in the interval of 3,800 to 4,000 copies. (iv) Breakeven appears in the interval of 4,000 to 4,200 copies. - Select your answer -Option (i)Option (ii)Option (iii)Option (iv)Item 2 (c) Use Goal Seek to answer the following question. With a demand of 3,600 copies, what is the access price per copy that the publisher must charge to break even? If required, round your answers to two decimal places. $

Explanation / Answer

total cost =fixed cost+variable cost

fixed cost =170000

profit =revenue-total cost

=3600*52-(170000+6*3600)=-4400

b)let x is the number of copies in whcih break even occurs

hence revenue=total cost

52*x=170000+6x

x=170000/46 =3695.652

hence option (ii) Breakeven appears in the interval of 3,600 to 3,800 copies.

c) for 3600 copies let sale price =x

hence 3600*x=170000+6*3600

x=$53.22

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