Eastman Publishing Company is considering publishing an electronic textbook about spreadsheet applications for business. The fixed cost of manuscript preparation, text book design, and web site construction is estimated to be $160,000. Variable processing costs are estimated to be $6 per book. The publisher plans to sell single-user access to the book for $46. Build a spreadsheet model to calculate profit and loss for a given demand so that you can do what-if analysis and answer the following questions.

Question 1

What is the anticipated profit for Eastman Publishing with a demand of 3,500 copies? Use whole numbers and a negative sign if needed.

Question 2

Use a data table to vary demand from 1,000 to 6,000 in increments of 200 to assess the sensitivity of profit to demand. At what demand does profit equal 16000?

Question 3

Use Goal Seek to determine the access price per copy that the publisher must charge to break even with a demand of 4,500 copies. What is the price? Round to 2 decimals.

Question 4

Through a series of web-based experiments, Eastman has created a predictive model that estimates demand as a function of price. The model is:

Demand = 4,000 - 6p, where p is the price of the e-book. Update your spreadsheet model to take into account this demand function and use Goal Seek to determine the price that results in breakeven.

What is the price? Round to two decimals.

Question 5

Use a data table that varies price from 50 to 400 in increments of $25 to find the price that maximizes profit. Without resetting to original values, what is the price? Use a whole number.