Computation of break even pointseast publishing company is

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Reference no: EM13356658

Computation of Break even points.

East Publishing Company is doing an analysis of a proposed new finance textbook. Using the following data, answer (a) through (d).

Fixed Costs per Edition:
Development (reviews, class testing, etc.	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)	0.60
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%.

a) Determine the company's breakeven volume for this book:

1. In units

2. In dollar sales

b) Develop a breakeven chart for the textbook.

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

d) Suppose East feels that $30 is too high a price to charge for the new finance textbook. It has examined the competitive market and determined that $24,000 would be a better selling price. What would the breakeven volume be at this new selling price?

Reference no: EM13356658

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