Question

A book publisher has fixed costs of $380,000 and variable costs per book of $11.00. The book sells for $27.00 per copy.

(a) How many books must be sold to break even?
(b) What is the profit per book?

Answer 1

The book publisher must sell 23,750 books to break even, and the profit per book is $16.00.

Step-by-step explanation:

To calculate the break-even point and profit per book for the book publisher, we apply the concept of break-even analysis in economics. The break-even point is the number of units that must be sold to cover both fixed and variable costs. The profit per book is the additional revenue earned over variable costs when a book is sold.

Break-Even Calculation

Break-even volume = Fixed Costs / (Selling Price per unit - Variable Cost per unit)
Break-even volume = $380,000 / ($27.00 - $11.00)
Break-even volume = $380,000 / $16.00
Break-even volume = 23,750 books

Therefore, 23,750 books must be sold to break even.

Profit per Book Calculation

Profit per book = Selling Price per unit - Variable Cost per unit
Profit per book = $27.00 - $11.00
Profit per book = $16.00

Thus, the profit per book is $16.00.