Stephanie Glace is a new author for Valley Publishing. Valley is negotiating to publish Glace's new book, which promises to be a best seller. The fixed cost of producing and marketing the book will be $675,000. The variable costs of producing and marketing will be $4.75 per copy sold. These costs are before any payments to Glace. Glace negotiates an up-front payment of $2.5 million, plus a 10% royalty on the net sales price of each book. The net sales price is the listed price of $40 per book less the margin paid to the bookstore to sell the book. The normal bookstore margin of 30% is to apply.

1. How many copies of the book must be sold to break even?

2. At what number of books sold would Stephanie Glace be indifferent between the current compensation scheme and a straight royalty of 30% on the net sales price of each book sold?