Bargain Press is considering publishing a new textbook. The publisher has developed the following cost data related to a production run of 6,000, the minimum possible production run. Bargain Press will sell the textbook for $45 per copy.

How many textbooks must Bargain Press sell in order to generate operating earnings (earnings before interest and taxes) of 20% on sales? (Round your answer up to the nearest whole textbook.)
A) 2,076 copies.
B) 5,207 copies.
C) 5,412 copies.
D) 6,199 copies.

Question

Bargain Press is considering publishing a new textbook. The publisher has developed the following cost data related to a production run of 6,000, the minimum possible production run. Bargain Press will sell the textbook for $45 per copy.

How many textbooks must Bargain Press sell in order to generate operating earnings (earnings before interest and taxes) of 20% on sales? (Round your answer up to the nearest whole textbook.)
A) 2,076 copies. 
B) 5,207 copies. 
C) 5,412 copies. 
D) 6,199 copies.

Quizplus · Accepted Answer

Selling price: $45
Variable cost = 37% (2% + 25% + 10%)
Contribution margin % = 63%
Contribution margin $ = 45 x 63% = $28.35
28.35X - 104,720* = .2 x 45X
28.35X = 9X + 104,720
19.35X = 104,720
X = 5,412
* FIXED: 35,000 + 18,500 + 9,320 + 7,500 + 4,400 + 30,000 = 104,720

Bargain Press Is Considering Publishing a New Textbook