Question

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.
	$
(b)	Use a data table to vary demand from 1,000 to 6,000 in increments of 200 to test the sensitivity of profit to demand. Breakeven occurs where profit goes from a negative to a positive value, that is, breakeven is where total revenue = total cost yielding a profit of zero. In which interval of demand does breakeven occur?
	(i) Breakeven appears in the interval of 4,200 to 4,800 copies.
	(ii) Breakeven appears in the interval of 4,000 to 4,200 copies.
	(iii) Breakeven appears in the interval of 3,800 to 4,000 copies.
	(iv) Breakeven appears in the interval of 3,600 to 3,800 copies.
	- Select your answer -Option (i)Option (ii)Option (iii)Option (iv)Item 2
(c)	Use Goal Seek to answer the following question. With a demand of 3,500 copies, what is the access price per copy that the publisher must charge to break even?
	If required, round your answers to two decimal places.

Answer 1

(a) The spreadsheet model is following:

Formula: B8 =B6*(B4-B3)-B2

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(b) Create data table

1. Select cell E2 and type =B8 (refer to the total profit cell).

2. Type the different percentages in column E (E3:E28).

3. Select the range E2:F28.

4. On the Data tab, in the Forecast group, click What-If Analysis.

5. Click Data Table.

6. Click in the 'Column input cell' box (the Demand are in a column) and select cell B6.

This is a one variable data table so we leave the Row input cell blank.

7. Click OK.

Breakeven occurs at 4,000 copies. Therefore,

(iii) Breakeven appears in the interval of 3,800 to 4,000 copies.

(c) Using Goal Seek

In Goal Seek window, enter the following parameters

Click OK

Result

Access price per copy = $ 51.71 (rounded to two decimal places)