Question

A small publishing company is planning to publish a new book. The production costs will include one-time fixed costs (such as editing) and variable costs (such as printing). The one-time fixed costs will total $ 63,042 . The variable costs will be $ 11.25 per book. The publisher will sell the finished product to bookstores at a price of $ 25.50 per book. How many books must the publisher produce and sell so that the production costs will equal the money from sales?

Answer 1

4424 books

Explanation:

After the revenue from each book pays for its own cost, it can contribute to the payment of the fixed costs. That "contribution margin" is ...

$25.50 -11.25 = $14.25

If each book sold contributes that much to the recovery of fixed costs, then the total number of books that must be sold to break even is ...

$63,042/($14.25/book) = 4424 books

4424 books must be produced and sold so production costs equal sales.