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Eastman Publishing Company is considering publishing an electronic textbook about spreadsheet applications for business. The fixed...

Eastman Publishing Company is considering publishing an electronic textbook about spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and web-site construction is estimated to be $170,000. Variable processing costs are estimated to be $5 per book. The publisher plans to sell single-user access to the book for $45.

Through a series of web-based experiments, Eastman has created a predictive model that estimates demand as a function of price. The predictive model is demand = 4,000 - 6p, where p is the price of the e-book.

B. Use Goal Seek to calculate the price that results in breakeven. If required, round your answer to two decimal places.

(a)

Build a spreadsheet model to calculate the profit/loss for a given demand. What is the demand?

Solutions

Expert Solution

Selling price per unit p
Variable cost per unit 5
Contribution per unit p-5
Demand 4000-6p
Fixed Cost 170000
Sales X Contribution = Fixed Cost
(4000-6p) (p-5) = 170000
4000p-20000-6p2+30p = 170000
4030p-6p2 = 190000
p(sale price) = 51
Demand                                       = 4000-6p
= 4000-6(51)
= 3694
Therefore the demand is 3694 units for the price for breakeven sale at sale price of 51
Spreadsheet
Particulars Per unit No of units Amount
Sale price = 51 3694 188394
Variable cost per unit = 5 3694 18470
Contribution per unit = 46 3694 169924
Fixed Cost = 170000 170000
Profit/loss = -76

ekkarill92 answered 2 years ago
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