Question

The Blankets ‘R Us Company sells hand-made blankets. The company is planning to print a catalog and send them out in a direct mail campaign. The cost of printing the catalog is $10,968.75 for setting up the presses plus $1.75 to print and mail each catalog. Each catalog that is mailed out generates $8.50 in revenue. (Hint: Use Goal Seek function) a) How many catalogs should be mailed out to break-even? b) How much revenue is generated at the break-even point? c) What is the profit if they mail out 2000 catalogs?

Answer 1

a) 1,625

b) $13,812.50

c) $2,531.25

Explanation:

a) The number of catalogs required to break-even is the number for which revenues equal printing costs:

`8.50n=1.75n +10,968.75\\n=(10,968.75)/(6.75)\\n=1,625`

1,625 catalogs are needed to break-even.

b) The revenue generated at the break-even point is given by the revenue per unit multiplied by 1,625 units:

`R = 1,625*\$8.50\\R=\$13,812.50`

Break-even revenue is $13,812.50.

c) The profit of mailing out 2000 catalogs is determined as the revenue minus total costs at that output:

`P=8.50n-1.75n -10,968.75\\P=6.75*2000 -10,968.75\\P=\$2,531.25`

The profit is $2,531.25.