Question
Multiple-Product Profitability Analysis, Multiple-Level Profitability Analysis Assume UCLA Store sells new college textbooks at the publishers suggested retail prices and pays the publishers an amount
Multiple-Product Profitability Analysis, Multiple-Level Profitability Analysis
Assume
UCLA Store sells new college textbooks at the publishers suggested retail prices and
pays the publishers an amount equal to 70% of the suggested retail price. The stores other variable
costs average 5% of sales revenue and annual fixed costs amount to $420,000.
REQUIRED
a. Determine the bookstores annual break-even point in sales dollars.
b. Assuming an average textbook has a suggested retail price of $125, determine the bookstores
annual break-even point in units.
c. UCLA Store is planning to add used book sales to its operations. A typical used book costs the
store 25% of the suggested retail price of a new book. The bookstore plans to sell used books
for 75% of the suggested retail price of a new book. Assuming unit sales are unchanged, de-
scribe the effect on bookstore profitability of shifting sales toward more used and fewer new
textbooks.
d. Chicago Publishers produces and sells new textbooks to college and university bookstores.
Assume typical project-level costs total $285,000 for a new textbook. Production and dis-
tribution costs amount to 20% of the net amount the publisher receives from the bookstores.
Textbook authors are paid a royalty of 15% of the net amount received from the bookstores.
Determine the dollar sales volume required for Chicago to break even on a new textbook. This
is the amount the bookstore pays the publisher, not the bookstores sales revenue.
e. For a project with predicted sales of 10,000 new books at $125 each, determine
1. The bookstores unit-level contribution.
2. The publishers project-level contribution.
3. The authors royalties
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started