MGT 3410 Homework 1 Spring 2022
Models of Cost, Revenue and Profit
1. Eastman 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 $60,000. Variable production and material costs are estimated to be $3 per book. Demand over the life of the book is estimated to be 3800 copies. The publisher plans to sell the text to college and university bookstores for $18 each.
a. What is the breakeven point?
b. What profit or loss can be anticipated with a demand of 3800 copies?
c. With a demand of 3800 copies, what is the minimum price per copy that the publisher must charge to break even?
d. If the publisher believes that the price per copy could be increased to $21.95 and not affect the anticipated demand of 3800 copies, what action would you recommend? What profit or loss can be anticipated?
2. Micromedia offers computer training seminars on a variety of topics. In the seminars each student work at a personal computer, practicing the particular activity that the instructor is presenting. Micromedia is currently planning a two-day seminar on the use of Microsoft Excel in statistical analysis. The projected fee for the seminar is $700 per student. The cost for the conference room, instructor compensation, lab assistants, and promotion is $11000. Micromedia rents computers for its seminars at a cost of $65 per computer per day.
a. Develop a model for the total cost to put on the seminar. Let x represent the number of students who enroll in the seminar.
b. Develop a model for the total profit if x students enroll in the seminar.
c. Micromedia has forecasted an enrollment of 30 students for the seminar. How much profit will be earned of its forecast is accurate?
d. Compute the breakeven point.
Note: Homework solution must be submitted electronically to Homework 1 folder in “Assignments” on D2L.
It is your choice to submit all of your work or just the final answer only. If you only submit the final answer and the answer is wrong, you will lose all the points assigned to that question. If you also show the steps how you get that answer, you still can earn partial credit as long as the steps are not completely wrong.
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