Question
Youve been assigned to analyze the profitability of Bill Clintons autobiography. The following assumptions have been made: Bill is receiving a one-time royalty payment of
Youve been assigned to analyze the profitability of Bill Clintons autobiography. The following assumptions have been made:
Bill is receiving a one-time royalty payment of $12 million.
The fixed cost of producing the hardcover version of the book is $1 million.
The variable cost of producing each hardcover book is $4.
The publishers net from book sales per hardcover unit sold is $15.
The publisher expects to sell 1 million hardcover copies.
The fixed cost of producing the paperback is $100,000.
The variable cost of producing each paperback book is $1
. The publishers net from book sales per paperback unit sold is $4.
Paperback sales will be double hardcover sales.Use this information to answer the following questions.
a. Determine how the publishers before-tax profit will vary as hardcover sales vary from 100,000 through 1 million copies.
b. Determine how the publishers before-tax profit varies as hardcover sales vary from 100,000 through 1 million copies and the ratio of paperback to hardcover sales varies from 1 through 2.4.
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