Question

In: Economics

1.     Eastman Publishing Company is considering publishing an electronic textbook on spreadsheet applications for business. The...

1.     Eastman Publishing Company is considering publishing an electronic textbook on spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and Web site construction is estimated to be $160,000. Variable processing costs are estimated to be $6 per book. The publisher plans to sell access to the book for $46 each. Eastman has created a predictive model that estimates demand as a function of price. The predictive model is demand = 4000-6*p where p is the price of the e-book.

Build a spreadsheet model to calculate the profit/loss for a given price.

Use goal seek to compute the price that results in break even

Use a data table that varies price from $50 to $400 increment of $25 to find the price that maximizes profit.

***Please show the formula in Excel.

Solutions

Expert Solution

a

FC

VC

P

Q

TR=(P*Q)

TC=(FC+VC*Q)

Profit = TR-TC

1,60,000

6

46

3724

171304

182344

-11040.00

b

FC

VC

P

Q

TR=(P*Q)

TC=(FC+VC*Q)

Profit = TR-TC

1,60,000

6

49.19

3704.88

182229

182229.2948

0.00

c

FC

VC

P

Q

TR=(P*Q)

TC=(FC+VC*Q)

Profit = TR-TC

1,60,000

6

50

3700

185000

182200

2800

1,60,000

6

75

3550

266250

181300

84950

1,60,000

6

100

3400

340000

180400

159600

1,60,000

6

125

3250

406250

179500

226750

1,60,000

6

150

3100

465000

178600

286400

1,60,000

6

175

2950

516250

177700

338550

1,60,000

6

200

2800

560000

176800

383200

1,60,000

6

225

2650

596250

175900

420350

1,60,000

6

250

2500

625000

175000

450000

1,60,000

6

275

2350

646250

174100

472150

1,60,000

6

300

2200

660000

173200

486800

1,60,000

6

325

2050

666250

172300

493950

1,60,000

6

350

1900

665000

171400

493600

1,60,000

6

375

1750

656250

170500

485750

1,60,000

6

400

1600

640000

169600

470400

Rahul Sunny answered 2 years ago
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