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A start-up publishing company estimates that the fixed costs of its first major project will be $175,000, the variable cost will be $20 per book, and the selling price per book will be $28.
a) How many books must be sold to break even?
b) What is the total revenue at the break-even point?
c) If the publishers take a total of $60,000 in salary (what cost is affected?) – how many books must be sold to break even?
d) What is the total revenue for the break-even volume when the publishers take a total of $60,000 in salary.
What issues are addressed by a compensation arrangement? Explain what is meant by the “motivational implications” of a compensation arrangement.
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