East Publishing Company is doing an analysis of a proposed new finance text. Using the following data, answer Parts a through e.
Fixed Costs (per edition): Development (reviews, class testing, and so on) $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) .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 percent. a. Determine the company’s breakeven volume for this book. •i. In units ii. In dollar sales b. Develop a breakeven chart for the text. c. Determine the number of copies East must sell in order to earn an (operating) profit of $21,000 on this text. d. Determine total (operating) profits at the following sales levels: i. 3,000 units •ii. 5,000 units iii. 10,000 units e. Suppose East feels that $30.00 is too high a price to charge for the new finance text. It has examined the competitive market and determined that $24.00 would be a better selling price. What would the breakeven volume be at this new selling price?
1 answer:
Answer:
a. Determine the company’s breakeven volume for this book. •i. In units ii. In dollar sales
total fixed costs = $70,000
variable costs per unit = $16
sales price = $30
contribution margin = $30 - $16 = $14
break even point in units = $70,000 / $14 = 5,000 textbooks
break even point in $ = 5,000 x $30 = $150,000
b. Develop a breakeven chart for the text.
units fixed costs variable costs total costs total sales
0 70000 0 70000 0
1000 70000 16000 86000 30000
2000 70000 32000 102000 60000
3000 70000 48000 118000 90000
4000 70000 64000 134000 120000
<u>5000 70000 80000 150000 150000 </u>
6000 70000 96000 166000 180000
I attached the graph that corresponds to this break even chart.
c. Determine the number of copies East must sell in order to earn an (operating) profit of $21,000 on this text.
($70,000 + $21,000) / $14 = 6,500 units
total sales = 6,500 x 30 = $195,000
d. Determine total (operating) profits at the following sales levels: i. 3,000 units •ii. 5,000 units iii. 10,000 units
i. $28,000 loss
ii. no gain/loss, break even point
iii. $70,000 gain
e. Suppose East feels that $30.00 is too high a price to charge for the new finance text. It has examined the competitive market and determined that $24.00 would be a better selling price. What would the break even volume be at this new selling price?
new contribution margin = $24 - $16 = $8
new break even point in units = $70,000 / $8 = 8,750 textbooks
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<u><em>Vegetables wilt or soften and their color intensifies as they boil</em></u>.
When boiling vegetables, the food will be sitting in a pot of water with the heat on low, medium, or hight. Once the water gets warmer, the water will cook the vegetables, causing them to get tender and softer. This will cause the vegetables color to get darker, and go limp.
When boiling vegetables, the flavor will not intensify, just the color, and it's shape. The water will drain any tase from the vegetable, but it will cause the food to go limp and get softer. Boiling is a famous way to cook your favorite vegetables, although the taste is not highly favored among lots of people.