A start-up publishing company estimates that the fixed costs of its first major

Question

A start-up publishing company estimates that the fixed costs of its first major project will be $190,000, the variable costs will be $18, and the selling price per book will be $34. (a) How many books must be sold for this project to break even? (b) Suppose the publishers wish to take a total of $40,000 in salary for this project. How many books must be sold to break even, and what is the break-even point, in dollars?

I have a) and b)....looking for clarification on the answer to b) What is the break-even point in dollars????

Explanation / Answer

By your last sentence saying 'you have a and b', do you mean you already know how to do it, or what.

Anyway, I'll go about explaining the whole problem with solution.

Here

fixed costs, F = $190,000

variable costs V = $18, (per book)

selling price S = $34, (per book)

Thus the amount being obtained in profit per book is P = S - V = $34 - $18 = $16.

Now, let the no.of books sold be n. We need to find this n.

a)

We need to break for the fixed cost. So,

F = P * n

n = F/P = $190000/$16

n = 11875 books need to be sold.

b)

In this case, the publishing house is expecting a total of $40000 in salary for the project, that is another amount of $40000 needs to be collected from the sales.

Here the total cost to be collected becomes

T = Fixed + Salary = $190000 + $40000 = $230000

The number of books to be sold becomes,

T = P*n

n = T/P = $230000/$16

n = 14375 books.

Thus for the second case, since the salary also needs to be obtained from the sales the number of sale of books needs to be 14375 to break even.

Hope this answers your question and your doubt. If you have anymore queries, leave a comment.

Cheers! :)

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