UESTION 14

Emma Jones contracted with the publisher of a GMAT test preparation manual package to sell the review materials at college fairs. She can purchase the book from the wholesaler at $131 per package, with the privilege of returning all unsold packages and receiving a $131 refund per package. She plans to sell the packages for $290 each. She also knows that she must pay $4350 to the organizers of the college fair for the booth rental. She will incur no other costs. Emma is considering an option whereby instead of paying a fixed cost of $4350 to rent the booth, she would pay a lower fixed cost plus a commission based on sales. If fixed costs are reduced by 65 percent and the commission is 30 percent of sales and she sells 61 packages, what is her operating profit?