Headlines Publishing Company (HPC) specializes in international business news publications. Its principal product is HPC-Monthly, which is mailed to subscribers the first week of each month. A weekly version, called HPC-Weekly, is also available to subscribers over the Web at a higher cost. Sixty percent (60%) of HPC's subscribers are international customers. The company experienced a fast growth in subscribers in its first few years of operation, but sales have begun to slow in recent years as new competitors have entered the market. HPC has the following cost structure and sales revenue for its subscription operations on a yearly basis. All costs and all subscription fees are in U.S. dollars. Fixed Cost $306,000 per year Variable Costs Mailing $ 0.60 per issue Commission 3.00 /subscription Administrative 1.50 /subscription Sales-Mix Information (based on volume) HPC-Weekly 20 percent HPC-Monthly 80 percent Selling Price HPC-Weekly $ 47 /subscription HPC-Monthly $ 19 /subscription Required: Use these data to determine the following: 4. HPC's required sales to reach a target before-tax profit (πB) of $75,000 for the year. What is the breakdown of this overall level of subscriptions into Weekly and Monthly subscriptions? (Round answers up to nearest whole number.) 5. What are the critical success factors for HPC? For its domestic subscribers? For its international subscribers? How can CVP analysis be used to make HPC more competitive?
Headlines Publishing Company (HPC) specializes in international business news publications. Its principal product is HPC-Monthly, which is mailed to subscribers the first week of each month. A weekly version, called HPC-Weekly, is also available to subscribers over the Web at a higher cost. Sixty percent (60%) of HPC's subscribers are international customers. The company experienced a fast growth in subscribers in its first few years of operation, but sales have begun to slow in recent years as new competitors have entered the market. HPC has the following cost structure and sales revenue for its subscription operations on a yearly basis. All costs and all subscription fees are in U.S. dollars.
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Fixed Cost |
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$306,000 per year |
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Variable Costs |
|
|
|
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Mailing |
$ |
0.60 |
per issue |
|
Commission |
|
3.00 |
/subscription |
|
Administrative |
|
1.50 |
/subscription |
|
Sales-Mix Information (based on volume) |
|||
|
HPC-Weekly |
|
20 |
percent |
|
HPC-Monthly |
|
80 |
percent |
|
Selling Price |
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|
|
|
HPC-Weekly |
$ |
47 |
/subscription |
|
HPC-Monthly |
$ |
19 |
/subscription |
|
|
Required: Use these data to determine the following:
4. HPC's required sales to reach a target before-tax profit (πB) of $75,000 for the year. What is the breakdown of this overall level of subscriptions into Weekly and Monthly subscriptions? (Round answers up to nearest whole number.)
5. What are the critical success factors for HPC? For its domestic subscribers? For its international subscribers? How can CVP analysis be used to make HPC more competitive?
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