Question

1) Book Publishing

You are the owner of a publishing firm and you have a new author that you plan to publish. It is an action/espionage novel. You believe that the author has a good book, but it is her first book and you don’t really know what the sales numbers will look like. As such, you want to do a break even analysis to find out how many books you have to sell in order to get back your initial investment.

The book will be published in paperback sized 6”x9”. The initial set up cost for setting up the press for the book is $900 dollars. After the additional cost for setting up the press, each book will cost $2.19 each to make. A) If the book retails at 9.99,

a) How many books do you need to sell in order to break even?

o 10.99

o 11.99

o 12.99

b) Is publishing this book a good idea? Are you willing to make the investment to print the books? How many books would you print to get the project started? Why? How much would you charge?

Answer 1

The following equation is formed to calculate the break-even number of units to be sold

900 + 2.19*x = 9.99x
x = 900/(9.99 - 2.19)
x = 115.4

i.e. 116 units

for $10.99 retial price
x = 900/(10.99 - 2.19)
x = 102.3

i.e. 103 units

for $11.99 retial price
x = 900/(11.99 - 2.19)
x = 91.8

i.e. 92 units

for $12.99 retial price
x = 900/(12.99 - 2.19)
x = 83.3

i.e. 94 units

b)
Yes publishing a book is a good idea because to reach break-even point ~116 copies to be sold which is not very high number.