East Publishing Company is doing an analysis of a proposed new finance text. Using the following data, answer parts a through e.

Fixed Costs (per edition):

Development (reviews, class testing, and so on) ......$18,000

Copyediting .................... 5,000

Selling and promotion ................. 7,000

Typesetting ...................... 40,000

Total .........................$70,000

Variable Costs (per copy):

Printing and binding .................. $4.20

Administrative costs .................. 1.60

Salespeople’s commission (2% of selling price) ...... .60

Author’s royalties (12% of selling price) ........ 3.60

Bookstore discounts (20% of selling price) ....... 6.00

Total ......................... $16.00

Projected Selling Price ................. $30.00

The company’s marginal tax rate is 40 percent.

a. Determine the company’s breakeven volume for this book

i. In units

ii. In dollar sales

b. Develop a breakeven chart for the text.

c. Determine the number of copies East must sell in order to earn an (operating) profit of $21,000 on this text.

d. Determine total (operating) profits at the following sales levels:

i. 3,000 units

ii. 5,000 units

iii. 10,000 units

e. Suppose East feels that $30.00 is too high a price to charge for the new finance text. It has examined the competitive market and determined that $24.00 would be a better selling price. What would the breakeven volume be at this new selling price?