# Breakeven and fixed costs

Elephant books sells paperback books for $7 each. The variable cost per book is $5. at current annual Sales of 200,000 books, the publisher is just breaking even. It is estimated that if the authors royalties are reduced, the variable cost per book will drop by $1. Assume authors royalties are reduced and sales remain constant; how mush more money can the publisher put into advertising(a fixed cost) and still break even?

a)$600,000

b) $466,667

c) $333,333

d) $200,000

https://brainmass.com/business/capital-structure-and-firm-value/breakeven-and-fixed-costs-258876

#### Solution Preview

After breakeven, all contribution margin goes to profits since the fixed costs do not change. ...

#### Solution Summary

The solution explains how much fixed costs can be increased given a change in variable cost so that the breakeven is achieved.

$2.19