Eastman Publishing Company is considering publishing a paperback textbook on spr

Question

Eastman Publishing Company is considering publishing a paperback textbook on spreadsheet applicati ons 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 4000 c opies. The publisher plans to sell the text to college and university bookstores for $20 each.

a. What is the breakeven point?

b. What profit or loss can be anticipated with a demand of 4000 copies?

c. With a demand of 4000 copies, what is the minimum price per cop y that the publisher must charge to break even?

d. If the publisher believes that the price per copy could be increased to $25.95 and not affect the anticipated demand of 4000 copies, what action would you recommend? What profit or loss can be anticipate

Explanation / Answer

a) Break Even Point = 80000 / (20-3) = 80000/17 = 4705 copies

b) Loss of 4000 * (20-3)-80000 = -12000 dollars

c) Profit=0

4000* (x-3) - 80000 = 0

x=23

d)

Profit would increased.

Profit = (25.95-3)*4000-80000 = 11800

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