cost-volume-profit analysis employing question

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Asymptote

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Fisher Publishing Inc. is doing a financial feasibility analysis for a new book. Editing and preproduction costs are estimated at $44,000. The printing costs are a flat $7000 for setup plus $8.00 per book. The author's royalty is 8% of the publisher's selling price to bookstores. Advertising and promotion costs are budgeted at $8200.
a.
If the price to bookstores is set at $34, how many books must be sold to break even? (Round your answer to the nearest number of books.)
b.
The marketing department is forecasting sales of 4800 books at the $34 price. What will be the net income from the project at this volume of sales?

I have no idea how to solve this question
 
Asymptote said:
Fisher Publishing Inc. is doing a financial feasibility analysis for a new book. Editing and preproduction costs are estimated at $44,000. The printing costs are a flat $7000 for setup plus $8.00 per book. The author's royalty is 8% of the publisher's selling price to bookstores. Advertising and promotion costs are budgeted at $8200.
a.
If the price to bookstores is set at $34, how many books must be sold to break even? (Round your answer to the nearest number of books.)
b.
The marketing department is forecasting sales of 4800 books at the $34 price. What will be the net income from the project at this volume of sales?

I have no idea how to solve this question
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First, please read

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There is absolutely no way to know how to help you without knowing what you are studying, your familiarity with algebra, etc.

So second, please provide the information requested.

Third, this question involves working with the following basic "model of the firm."

[MATH]\pi = \text {profit.}[/MATH]
[MATH]p = \text {sales price per unit.}[/MATH]
[MATH]u = \text {units sold.}[/MATH]
[MATH]r = \text {revenue.}[/MATH]
[MATH]e = \text {expense.}[/MATH]
[MATH]f = \text {fixed costs.}[/MATH]
[MATH]v = \text {variable cost per unit sold.}[/MATH]
[MATH]\pi = r - e.[/MATH]
[MATH]r = p * u.[/MATH]
[MATH]e = f + (u * v).[/MATH]
Can you set that up?
 
NI=(S-VC)X - FC
NI= net income
VC= variable cost
FC= fixed cost
X= total number of units sold in the period
S= selling price or revenue per unit
Break even=( NI = 0)

a)
I think fixed cost is 45000+ 7000+8000 which is FC= 600000
S= 34
I have no idea with finding VC
X Is what I am looking for


b)
x= 4800
s=48
FC=60000

i dont know how to approach this question
 
For both questions, you need to know the formulas for profit (net income), revenue, and expense (cost).

What are those formulas?

Fixed costs are straight-forward:

[MATH]44,000 + 7,000 + 8,200 = 59,200.[/MATH]
Where did you come up with [MATH]45,000 + 7,000 + 8,000 = 60,000?[/MATH]
Variable costs per unit are a bit trickier. Each book will have a variable cost of production of 8 dollars. But the publisher also pays royalties on each book sold of 8% of the sales price. That is a cost to the publisher over and above the variable costs of production. So using your names for the variables, we get

[MATH]VC = 8 + (0.08 * S) = 8 + 0.08 * 34 = 8 + 2.72 = 10.72.[/MATH]
You are correct. To find break-even, you set [MATH]NI = 0.[/MATH]
So what is the formula for NI?
 
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