Question

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 $170,000. Variable processing costs are estimated to be $5 per book. The publisher plans to sell single-user access to the book for $45. 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) Build a spreadsheet model to calculate the profit/loss for a given demand. What is the demand?

Answer 1

Answer:

the demand is 3,730 units

Explanation:

since the predictive model estimates demand as 4,000 - 6p, then at a selling price of $45 per ebook, the total demand = 4,000 - (6 x 45) = 4,000 - 270 = 3,730 units.

the estimated profit when demand = 3,730 is:

total revenue = 3,730 x $45 = $167,850

- variable costs = 3,730 x $5 = ($18,650)

- fixed costs = ($170,000)

net loss = -$20,800

I attached the excel spreadsheet model