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Question: lifecycle costing pricing of a textbook julie flair a former...

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12-A Life cycle costing, pricing of a textbook. Julie Flair, a former sa 12-A (cont representative, has been promoted to be Accounting Series editor of Gulf Publishir Pricing Schedule foryear of ESA Her first task concerns the pricing of the third edition of Finanaal Statement Ana $80,000 by Scott Leland, hereafter FSA GB) A new edition of this book appears every fo Manuscript preparation cost 20,000 Marketing cost rint run of 20,000 copies) I40,000 Printing cost Obased on a statements. $240,000 Year 1 Year 2 Year 3 Year 4 1 Estimated sales in year 25,000 20,000 20,000 Printed (units (based on year 1 sales of 2E) 0,000 16,000 18,000 16,000 15 Sales (units) 16,000 1,000 3,000 Complimentaries distributed (uni 18 payment to the author of $3.30) $18 $18 $16 Wholesale price per copy Wholesale price per copy in yea 1 Summary data relating to production costs for the manuscript of the third edition Flair a gut feeling that $33 per copy i edition has 4 wholesale price of the second pri Using the widely followed university bookstore markup of 25% on the introductor he cost per copy to students would run at $41.25. No textbook in are: 1. Payment to Leland to cover development costs $10,000 2. In-house manuscript preparation costs at Gulf Publishing analysis market has Sales payments from retailers (production editor, proofing, etc 18,000 financial statement to be rst payments are ma ing, page layouts, and color graphics 50000 eluctant for Publishing Royalty det Subcontracting of index preparation received by Gulf at the end of each year confirms to Flair a widel uthors at the end of each year. of Gulf Publishing to bring OL. One of the sales representatives is going circulating rumor that wood major time. These costs of $80,000 have already been incurred. The $10000 Financial Statement Analysis text in three mon leadin payment to Leland the first edition of a competitor is the author of the current author of the new Homewood Press Presss highly successfu just It now the start of r 1 of FSA (3E). The book wil be printed ne text in the Introductory Accounting market. Homewood sale week and will be the bookshelves one month later. strategy is to price textbooks at the low end of the spectrum and to aim for high volume Printing costs will depend on the size of the print run. The oost schedule from Adept Printing for the first printing of FSA FSA (3E) prepared by Flair Require Schedule for Year 1 o 1. Critique the Pricing assistant 50,000 5,000 following assum ons. copy, $20. b. Print runs same as 2E; wholesale price per copy, per Print run same as 2E, pr per Price of money whe of 65,000 c es in Year 1, wholesale value gnore the nventory holding costs and the he each scenario, assum computing life revenue or fe-cycle costs For second edition. budgeted sales quantities equal the quantities the consider i what cost other would you recommend that Fair 0,000 115,000 5,000 140,000 20,000 160,000 25,000 160,000 plus $3 per copy above 25.000 Above 25,000 harge at the start of the year in TIm fing requires payment of the printing c pricing decision? hich the print run is made Flair intends to spend $20,000 in 12-A (contd) Flairs assistant has prepared the following schedule to support a year 1 What relevant Assume that Gulf orders a production run of 65,000 in year wholesale price of $33 for FSA 13E) costos) might arise from this decision that would not be recorded by the external What are the pros and cons of makin a Print run of 8 financial reporting system? 65,000 in year 1?

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