Eastman Publishing Company is considering publishing an electronic textbook about spreadsheet applications for business. The fixed cost of manuscript preparation, textbook 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.

(a)

Build a spreadsheet model in Excel to calculate the profit/loss for a given demand. What profit can be anticipated with a demand of 3,500 copies? For subtractive or negative numbers use a minus sign.

$

(b)

Use a data table to vary demand from 1,000 to 6,000 in increments of 200 to test the sensitivity of profit to demand. Breakeven occurs where profit goes from a negative to a positive value, that is, breakeven is where total revenue = total cost yielding a profit of zero. In which interval of demand does breakeven occur?

(i) Breakeven appears in the interval of 3,600 to 3,800 copies.

(ii) Breakeven appears in the interval of 4,000 to 4,200 copies.

(iii) Breakeven appears in the interval of 4,200 to 4,400 copies.

(iv) Breakeven appears in the interval of 4,400 to 4,600 copies.

- Select your answer -Option (i)Option (ii)Option (iii)Option (iv)Item 2

(c)

Use Goal Seek to determine the access price per copy that the publisher must charge to break even with a demand of 3,500 copies. If required, round your answer to two decimal places.

$

(d)

Consider the following scenarios:

	Scenario 1		Scenario 2		Scenario 3		Scenario 4		Scenario 5
Variable Cost/Book	$6		$8		$12		$10		$11
Access Price	$46		$50		$40		$50		$60
Demand	2,500		1,000		6,000		5,000		2,000

For each of these scenarios, the fixed cost remains $160,000. Use Scenario Manager to generate a summary report that gives the profit for each of these scenarios. Which scenario yields the highest profit? Which scenario yields the lowest profit? For subtractive or negative numbers use a minus sign.

- Select your answer -Scenario 1Scenario 2Scenario 3Scenario 4Scenario 5Item 4 yields the highest profit of $ .

- Select your answer -Scenario 1Scenario 2Scenario 3Scenario 4Scenario 5Item 6 yields the lowest profit of $ .