Harrison and Kowal Publishing company is considering publishing a paperback text

Question

Harrison and Kowal Publishing company is considering publishing a paperback textbook on spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and production setup is estimated to be $80,000. Variable production and material costs are estimated to be $3 per book. Demand over the life of the book is estimated to be 4,000 copies. The publisher plans to sell the text to college and university bookstores for $20 each. With a demand of 4,000 copies, what is the minimum price per copy that the publisher must charge to break even? Please show work

Explanation / Answer

Solution:

The minimum price per copy that the publisher must charge to break even point
Breakeven point = Fixed Cost/(Sell Price - Variable Cost)

Breakeven point = 80000/(20-3)
= 4705.88235

Breakeven point = 4705 Units

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