| Fisher Publishing Inc. is doing a financial feasibility analysis for a new book. Editing and preproduction costs are estimated at $XX,000. The printing costs are a flat |
| $Y,Y00 for setup plus $8.00 per book. The author's royalty is 7% of the publisher's net price to bookstores. Advertising and promotion costs are budgeted at $9,000. |
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| To calculate the editing and preproduction costs, take the first letter of your last name, determine which number it is in the | | | | |
| alphabet, and multiply by 1000 and then add this value to $20,000. For example, conyette starts with the letter 'c', 'c' is the 3rd letter of alphabet, | |
| so I would take the number 3 and multiply it by 1000 to derive $3,000 and when added to $20,000 the editing and preproduction costs would be $23,000. | |
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| To calculate the flat portion of the printing fee for setup, take the first letter of your first name, determine which number it is in the alphabet, and multiply | |
| by 100 and then add this to $6,000. For example, Michael starts with the letter 'm', 'm' is the 13th letter of the alphabet, so I would take the number 13 | |
| and multiply it by 100 to derive $1,300 and when added to $6000, the flat portion of the printing cost would be $7,300. | | | | |
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| a. If the price to bookstores is set at $35, how many books must be sold to break even? | | | | | | | |
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| b. In a highest cost scenario, fixed costs might be $5000 higher and the printing costs might be $9.80 per book. By how many books would the break-even volume |
| be raised? | | | | | | | | | | | | | | |
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| For parts c to e below, printing costs are best described as uniformly distributed between $5.50 and $7.50 per book, there is no royalty fee and | | |
| the flat portion $Y,Y00 remains constant. Editing & advertising costs are the same as in part a). Demand for the book is described as | | | |
| normally distributed with a mean that is 100 units more than the breakeven point calculated in a) above with a standard deviation of 150 units. | | |
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| Use 500 simulation trials to answer the following questions. | | | | | | | | | | |
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| c. If the price to bookstores is set at $35, what is the mean profit for the simulation? | | | | | | | |
| d. What is the probability the book launch will result in a loss? | | | | | | | | | |
| e. What is your recommendation regarding the publication of the new book? Yes or No? | | | | | | | |