Addition plus publishes math textbooks for middle

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AdditionPlus publishes math textbooks for middle schools in western Pennsylvania. AdditionPlus sold 1 million textbooks last year for $14 million in revenue. Each textbook uses $1 in paper, ink, and binding, and is assigned $1 in untraceable materials, printing press maintenance, and direct labor costs. AdditionPlus owns its printing press, which it purchased last year for $50 million. The press is depreciated over a 10-year period using straight-line depreciation. Administrative and selling costs equal $5 million each year.

You need to help AdditionPlus decide whether to expand by adding a product line of science textbooks. Science textbooks sell for slightly less than math textbooks (science textbooks sell for $12 per book), and science textbooks use more color graphics than math textbooks. Each science textbook costs $3 in paper, ink and binding. Because printing both science textbooks and math textbooks involves more frequent setup and re-setup of the printing press, both math and science textbooks would be assigned a cost of $4 per textbook in untraceable materials, printing press maintenance, and direct labor costs if AdditionPlus starts selling science textbooks.

AdditionPlus expects sales to be 1 million textbooks per year. No additional administration or selling costs are expected if the firm sells science textbooks, and the printing press has excess capacity to print both math and science textbooks without needing to purchase additional printing press capacity. How much profit (or loss) would AdditionPlus gain (lose) from adding the science textbook product line? ***If a loss, enter your answer as a negative number (e.g. -12). Please enter your answer in millions, rounded to the nearest million (e.g. if you calculate $11,500,000, enter $12 below)

Reference no: EM131135576

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