Eastman Publishing Company is considering publishing an electronic textbook on spreadsheet applications for business. The fixed cost
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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 $150,000. Variable processing costs are estimated to be $7 per book. The publisher plans to sell access to the book for $49 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 3,400 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 3,000 to 3,200 copies. | |
(ii) Breakeven appears in the interval of 3,400 to 3,600 copies. | |
(iii) Breakeven appears in the interval of 3,600 to 3,800 copies. | |
(iv) Breakeven appears in the interval of 3,800 to 4,000 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 3,400 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. |
Related Book For
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
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