Question Completion:
What profit can be anticipated with a demand of 3,400 copies?
With a demand of 3,400 copies, what is the access price per copy that the publisher must charge to break even?
Answer:
Eastman Publishing Company
a) A loss of $7,200 can be anticipated with a demand of 3,400.
b) The access price per copy with a demand of 3,400 copies should be $51.
Step-by-step explanation:
a) Data and Calculations:
Fixed cost = $150,000
Variable costs per book = $7
Selling price of single-user access per book = $49
Demand = 3,400 copies
Profit based on a demand of 3,400 copies:
Income Statement:
Sales Revenue ($49 *3,400) $166,600
Variable costs ($7 * 3,400) 23,400
Contribution margin $142,800
Fixed cost 150,000
Net loss $7,200
To break-even, the total sales revenue should be equal to the total costs. Therefore, the access price should be:
Total costs:
Fixed cost $150,000
Variable 23,400
Total costs $173,400
Sales unit 3,400
Access price = $51.00 ($173,400/3,400)