Question
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
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 $150,000. Variable processing costs are estimated to be $7 per book. The publisher plans to sell single-user access to the book for $49.
(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 3,400 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 3,000 to 3,200 copies. | |||||
(ii) Breakeven appears in the interval of 3,400 to 3,600 copies. | |||||
(iii) Breakeven appears in the interval of 3,600 to 3,800 copies. | |||||
(iv) Breakeven appears in the interval of 3,800 to 4,000 copies.
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