Question

Problem 10-3 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 $160,000. variable processing costs are estimated to be $6 per book. the publisher plans to sell single-user access to the book for $46. (a) build a spreadsheet model in excel to calculate the profit/loss for a given demand. what profit can be anticipated with a demand of 3,500 copies? for subtractive or negative numbers use a minus sign.

Answer 1

We are given the following data for publishing an electronic textbook about spreadsheet applications for business.

Fixed cost  = $160,000
Variable cost = $6 per book
Selling price = $46 per book

First, we have to establish an equation to know the profit or loss of the company.

Total cost = Fixed cost + Variable Cost (number of books)
Total sales = Selling price (number of books)

The profit is calculated by subtracting the total cost from the total sales.

Profit = Total sales - total cost

The following equations are useful:

let x = number of books produced
      y = number of books sold

Total cost = $160,000 + $6x
Total sales = $46y

The value of x can be changed according to the actual number of books produced. y can be changed according to the actual number of books sold

Profit = $46y - ($160,000 + $6x)

If x = y = 3500

Profit = $22,000 for 3500 books