Question

At a price of $4.00 each, shape magazine sells 1.25 million copies of its magazine targeted to young women seeking a healthier lifestyle. if the price per issue is increased to $4.50 each, only 1 million copies will be sold. fixed costs are $1 million and unit variable costs are $0.50 per magazine. calculate the average revenue for shape magazine at the higher price.

Answer 1

Selling price = $4.50
Copies sold = $1 million
Fixed costs = $1 million
Unit variable costs = $0.50 per magazine

Sales = $4,500,000
Fixed costs = $1 million
Variable costs = $500,000

Revenue = Sales - fixed costs - variable costs
Revenue = $4,500,000 - $1,000,000 - $500,000
Revenue = $3,000,000