What is the probability the book launch will result

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Reference no: EM133752641

Case: 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.
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.
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.
a. If the price to bookstores is set at $35, how many books must be sold to break even?
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?
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.
Use 500 simulation trials to answer the following questions.
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?

Reference no: EM133752641

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