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 $170,000. Variable processing costs are estimated to be $5 per book. The publisher plans to sell single-user access to the book for $45.

Through a series of web-based experiments, Eastman has created a predictive model that estimates demand as a function of price. The predictive model is demand = 4,000 - 6p, where p is the price of the e-book.

(a)	Build a spreadsheet model to calculate the profit/loss for a given demand. What is the demand?
(b)	Use Goal Seek to calculate the price that results in breakeven. If required, round your answer to two decimal places.
	$
(c)	Use a data table that varies price from $50 to $400 in increments of $25 to find the price that maximizes profit.
	If Eastman sells the single-user access to the electronic book at a price of $ , it will earn a maximum profit of $ .

Answer 1

D B b) Input 1a) Input 2 Price per unit 3 Variable cost per unit 4 Fixed cost c) Price Demand Profit Price per unit Variable cost per unit Fixed cost 51.02 5 170000 3700 -151500 75 3550 63500 3400 17000 3250 90000 3100 155500 2950 213500 2800 264000 2650 307000 250 2500 342500 275 2350 370500 2200 391000 2050 404000 1900 409500 1750 407500 1600 398000 5 170000 100 7 Demand 8 profit/- loss 3730 Demand 175 3693.9 0.00 profit/ - loss 2252 12 13 350 375 15 16 17 18 19 20 21 If Eastman sells the single-user access to the electronic book at a price of $350, it will earn a maximum profit of $409500 23

c) Price Demand Profit İJa) Input 2 Price per unit 3 Variable cost per unit 5 b Input Price per unit Variable cost per unit Fixed cost 51.0222360928763 5 170000 50 J2+25 4000-6 J3(J3-45)*K3-170000 J3+25 4000-6 4 (J4-45)"K4-170000 J4+25 4000-6 J5(J5-45)*K5-170000 J5+25 4000-6 J6 (J6-45)*K6-170000 J6+25 4000-6 J7 (J7-45)*K7-170000 J7+25 4000-6 J8 (J8-45)"K8-170000 J8+25 4000-6 9 (19-45)*K9-170000 J9+25 4000-6 J10(J10-45) K10-170000 J10+25 4000-6 J11(J11-45) K11-170000 J11+25 4000-6 J12(J12-45) K12-170000 112+25-4000-6.113 s(113-45)"K13-170000 J13+25 -4000-6*14 -(J14-45)*K14-170000 :114+25-4000-6.115 s(115-45)"K15-170000 J15+25 4000-6 J16-(J16-45) K16-170000 45 -4000-6 2 (J2-45)*K2-170000 Fixed cost 170000 -4000-6 C2 (C2-C3) C7-04 Demand 4000-6"G2 Demand profit/ - loss 8 profit/ - loss (G2-G3) G7-G4 10 12 13 14 15 16 17 18 19 20 If Eastman sells the single