The world famous discount store, Fernwood Booksellers, specializes in selling paperback books for $7 each. The variable cost per book is $5. With current annual sales of 200,000 books, the publisher is barely breaking even. It is estimated that if authors' royalties are reduced, the variable cost per book will be reduced by $1. Assume authors' royalties decline and sales remain constant; How much more money can the publisher put into advertising (a fixed cost) and still break even? (Hint: Find the fixed cost for both alternatives.)

Answer rating: 100% (QA)

before royalty reduction Sales 7 multiply by 200000 book... View the full answer