Campbell Ave. Bookstore, specializes in selling paperbacks for $7 each. The variable cost per book is $5. At current annual sales of 250,000 books, the store is just breaking even. It is estimated that if the authors' royalties are reduced, the variable cost per book will drop by $.50. Assume authors' royalties are reduced and sales remain constant; how much more money can the publisher put into advertising (a fixed cost) and still break even? a) $150,000 b) $125,000 c) $135,000 d) $130,000 e) $120,000

Campbell Ave. Bookstore, specializes in selling paperbacks for $7 each. The variable cost per book is $5. At current annual sales of 250,000 books, the store is just breaking even. It is estimated that if the authors' royalties are reduced, the variable cost per book will drop by $.50. Assume authors' royalties are reduced and sales remain constant; how much more money can the publisher put into advertising (a fixed cost) and still break even? a) $150,000 b) $125,000 c) $135,000 d) $130,000 e) $120,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10P

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Question

Campbell Ave. Bookstore, specializes in selling paperbacks for $7 each. The variable
cost per book is $5. At current annual sales of 250,000 books, the store is just
breaking even. It is estimated that if the authors' royalties are reduced, the variable
cost per book will drop by $.50. Assume authors' royalties are reduced and sales
remain constant; how much more money can the publisher put into advertising (a
fixed cost) and still break even?
a) $150,000
b) $125,000
c) $135,000
d) $130,000
e) $120,000

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