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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 $160,000. Variable processing costs are estimated to be $6 per book. The publisher plans to sell single-user access to the book for $46. (a) Build a spreadsheet model in Excel to calculate the profit/loss for a given demand. What profit can be anticipated with a demand of 3,500 copies

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Answer:

See the excel spreadsheet attached.

Anticipated profit/(loss) is ($20,000).

Explanation:

The net profit/(loss) is the difference between the total sales and total cost. The total sales is computed as the product of the sale of each book and the number of books sold. The total cost is the sum of the variable and fixed costs.

The total variable cost is the product of the variable cost per book and the total number of books sold.

Alternatively, sales less variable cost gives contribution margin. Contribution margin less fixed cost gives the net profit. As shown in the spreadsheet attached.

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