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Eastman Publishing Copmany is considering publishing a paperback textbook on spread-sheet...

Question:

Eastman Publishing Copmany is considering publishing a paperback textbook on spread-sheet applications for business. The fixed cost is $160,000. Variable cost is $6 per book. The publisher plans to sell the text to college and university bookstores for $46 each.

a) What is the breakeven point?

b) What profit or loss can be anticipated with a demand of 3800 copies?

c) With a demand of 3800 copies, what is the minimum price per copy that the publisher must charge to break even?

d) If the publisher believes that the price per copy could be increased to $50.95 and not affect the anticipated demand of 3800 copies, what action would you recommend? What profit or loss can be anticipated?

Break even point:

Break even point is the point in the level of sales where all the expenses and incomes are equal or where there is no profit or no loss. It is given as the fixed costs divided by the contribution per unit.

Answer and Explanation:

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Question a)

Break even point = Fixed costs / Contribution per unit = 160000 / (46 - 6) = 4000 units

Question b)

At 3800 copies,

Contribution = 40...

See full answer below.


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Break-Even Analysis: Definition & Example

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Chapter 4 / Lesson 3
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Performing a break-even analysis can help you make decisions regarding how much of your product or service you need to sell to make a profit. In this lesson, you'll learn what a break-even analysis is and how it is calculated.


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