Jacob, a chef who lives in the community, is really excited to launch his own cookbook. He found a local publishing house that charges him $25,500 per year in overhead (fixed costs), $14 per textbook in publishing costs, and royalties of 10% of the sales price. The company has indicated that they can print a maximum of 12,000 books per year. Jacob decided, with the publishing house, to sell the book for $25 each.
a) Create a break-even graph that demonstrates fixed costs, total costs, total revenues, break-even point, and profit and loss areas.
b) Determines the break-even point relative to volume and relative to revenue and calculates the break-even point as a percentage of maximum capacity.
c) Calculate the new break-even point for volume and revenue if fixed costs increase by 15% per year, publishing costs increase by $6 per book and the selling price increases to $30.
4.9
