Question

A small publishing company is planning to publish a new book. The production costs will include one-time fixed costs (such as editing) and variable costs (such as printing). The one-time fixed costs will total $31,460 The variable costs will be $10.75 per book. The publisher will sell the finished product to bookstores at a price of $21.75 per book. How many books must the publisher produce and sell so that the production costs will equal the money from sales?

Answer 1

Answer: 2,860 books

Explanation:

First find the Contribution margin of the sale:

= Selling price - Variable cost

= 21.75 - 10.75

= $11.00

With a contribution margin, you can use the following formula to find out the number of books that can be sold to equate the production cost to sale:

= Fixed costs / Contribution margin

= 31,460 / 11

= 2,860 books