Please, I have been answered three timse the same way and i dont understand the working out and think that the amswer is incorrect.

Press Ltd is considering launching a new monthly magazine PressInsights at a selling price of 8 per copy. Sales of the magazine are expected to be 50,000 copies per month, but it is possible that the actual sales could differ quite significantly from this estimate. The Press Ltd has hired a management consultant to produce a report on the sales potential and production costs of the new magazine. The consultant has recommended two different methods of producing the magazine and neither would involve any additional capital expenditure. The estimated production costs for each of the two methods of production, together with the additional marketing and distribution costs of selling the new magazine, are summarised below:

Method One : variable costs= 5,5 per copy, specific fixed costs= 32,000 per month

Method Two: variable costs=5 per copy, specific fixed costs = 60,000 per month

For Semi-variable costs, the following estimates have been obtained:

for 30,000 copies 55,000 per month (method 1) 47,500 per month (method 2), for 45,000 copies 70,000 per month (method 1) 55,000 per month (method 2) and for 65,000 copies 90,000 per month (method 1) 65,000 per month (method 2)

It may be assumed that the fixed cost content of the semi-variable costs will remain constant throughout the range of activity shown. The company currently sells a magazine, PressView covering related topics to those that will be included in the new publication and consequently it is anticipated that sales of this existing magazine will be adversely affected. It is estimated that for every ten copies sold of the new magazine, sales of the existing magazine will be reduced by two copies. Sales and cost data of the existing magazine, PressView, are shown below:

Sales 110,000 copies per month, Selling price 9 per copy , Variable costs 5.5 per copy, Specific fixed costs 80,000 per month

1. Calculate, for each production method, the net increase in company profits which will result from the introduction of the new magazine, PressInsights, at each of the following levels of activity: a. 40,000 copies per month b. 50,000 copies per month c. 60,000 copies per month

2. Calculate, for each production method, the amount by which sales volume of the new magazine could decline from the anticipated 50,000 copies per month, before the company makes no additional profit from the introduction of the new publication.

. 3.The company has to decide a) whether it should proceed with the introduction of the new magazine, PressInsights, and if to proceed b) to decide between the two production methods recommended by the management consultant. Comment on the two production methods and recommend an option to the Press Ltd.