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 $156,000. Variable processing costs are estimated to be $9 per book. The publisher plans to sell single-user access to the book for $44. 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) Construct an appropriate spreadsheet model for calculating the profit/loss at a given single-user access price taking into account the above demand function. What is the profit estimated by your model for the given costs and single user access price (in dollars). $ (b) Use Goal Seek to calculate the price (in dollars) that results in breakeven. (Round your answer to the nearest cent.) (c) Use a data table that varies price from $50 to $400 in increments of $25 to find the price (in dollars) that maximizes profit.
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 $156,000. Variable processing costs are estimated to be $9 per book. The publisher plans to sell single-user access to the book for $44. 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) Construct an appropriate spreadsheet model for calculating the profit/loss at a given single-user access price taking into account the above demand function. What is the profit estimated by your model for the given costs and single user access price (in dollars). $ (b) Use Goal Seek to calculate the price (in dollars) that results in breakeven. (Round your answer to the nearest cent.) (c) Use a data table that varies price from $50 to $400 in increments of $25 to find the price (in dollars) that maximizes profit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $156,000. Variable processing costs are estimated to be $9 per book. The publisher plans to sell single-user access to the book for $44.
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) Construct an appropriate spreadsheet model for calculating the profit/loss at a given single-user access price taking into account the above demand function. What is the profit estimated by your
model for the given costs and single user access price (in dollars).
(b) Use Goal Seek to calculate the price (in dollars) that results in breakeven. (Round your answer to the nearest cent.)
(c) Use a data table that varies price from $50 to $400 in increments of $25 to find the price (in dollars) that maximizes profit.
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