Seven months ago, Naib Publishing Company published its first book (Book N). Since then, the company has added four more books to its product list (Books S, Q, X, and H). Management is considering proposals for three more new books, but editorial capacity limits the company to producing only seven books annually. Before deciding which of the proposed books to publish, management wants you to evaluate the performance of its existing book list. Recent revenue and cost data appear below.
Naib Publishing Company
Product Profit and Loss Summary
For the Year Ended December 31, 20x9

Projected data for the proposed new books are Book P, sales, $450,000, contribution margin, $45,000; Book T, sales, $725,000, contribution margin, ($25,200); and Book R, sales, $913,200, contribution margin, $115,500. Projected direct fixed costs are: Book P, $5,000; Book T, $6,000; Book R, $40,000.
Required
1. Analyze the performance of the five books currently being published.
2. Manager Insight: Should the company eliminate any of its present products? If so, which one(s)?
3. Manager Insight: Identify the new books you would use to replace those eliminated. Justify your answer.

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Company Totals Book N $813,800 325,520 $312,800 $190,260 $283,230 $212,100 $1,323,910 Book S Book Q Book X Book H Sales Less variable costs $782,000 $634,200 $944,100 $707,000 $3,881,100 Materials and binding Editorial services Author royalties Sales commissions Other selling costs 57,205 101,472 151,056 95,130 141,615 18,334 73,420 370,905 620,976 697,305 196,164 $727,260 $481,990 $651,440 $608,020 $3,209,260 $ 73,250 54,740 $152,210 $292,660 $ 98,980 671,840 451,240 ($ 24,000) 26,500) 62,600 $192,200 16,300 220,600 71,380 130,208 162,760 50,682 740,550 88,200 125,120 156,400 44,740 80,700 113,120 141,400 60,700 21,708 Total variable costs Contribution margin Less total fixed costs 97,250 81,240 89,610 100,460 82,680 Operating income Direct fixed costs included in total fixed costs above S 51,200 65,100 49,400 69,100 58,800 $ 293,600