Headlines Publishing Company (HPC) specializes in internationalbusiness news publications. Its principal product isHPC-Monthly, which is mailed to subscribers the first weekof each month. A weekly version, called HPC-Weekly, isalso available to subscribers over the Web at a higher cost. Sixtypercent (60%) of HPC's subscribers are international customers. Thecompany experienced a fast growth in subscribers in its first fewyears of operation, but sales have begun to slow in recent years asnew competitors have entered the market. HPC has the following coststructure and sales revenue for its subscription operations on ayearly basis. All costs and all subscription fees are in U.S.dollars.
Fixed Cost
$306,000 per year
Variable Costs
Mailing
$0.60 per issue
Commission
3.00/subscription
Administrative
1.50/subscription
Sales-Mix Information (based on volume)
HPC-Weekly
20 percent
HPC-Monthly
80 percent
Selling Price
HPC-Weekly
$47/subscription
HPC-Monthly
$19/subscription
Required:
Use these data to determine the following:
1. Contribution margin per unit for weekly and for monthlysubscriptions.
2. Contribution margin ratio for weekly and for monthlysubscriptions. (Round answers to two decimal points.) 3. HPC'sbreakeven point in annual sales units and sales dollars (roundanswers up, to nearest whole number). 4. HPC's required sales toreach a target before-tax profit (ÏB) of $75,000 for the year. Whatis the breakdown
of this overall level of subscriptions into Weekly and Monthlysubscriptions? (Round answers up to nearest whole number.)
5. What are the critical success factors for HPC? For its domesticsubscribers? For its international subscribers? How can CVPanalysis be used to make HPC more competitive?
Headlines Publishing Company (HPC) specializes in internationalbusiness news publications. Its principal product isHPC-Monthly, which is mailed to subscribers the first weekof each month. A weekly version, called HPC-Weekly, isalso available to subscribers over the Web at a higher cost. Sixtypercent (60%) of HPC's subscribers are international customers. Thecompany experienced a fast growth in subscribers in its first fewyears of operation, but sales have begun to slow in recent years asnew competitors have entered the market. HPC has the following coststructure and sales revenue for its subscription operations on ayearly basis. All costs and all subscription fees are in U.S.dollars.
Fixed Cost | |
$306,000 per year | |
Variable Costs | |
Mailing | $0.60 per issue |
Commission | 3.00/subscription |
Administrative | 1.50/subscription |
Sales-Mix Information (based on volume) | |
HPC-Weekly | 20 percent |
HPC-Monthly | 80 percent |
Selling Price | |
HPC-Weekly | $47/subscription |
HPC-Monthly | $19/subscription |
Required:
Use these data to determine the following:
1. Contribution margin per unit for weekly and for monthlysubscriptions.
2. Contribution margin ratio for weekly and for monthlysubscriptions. (Round answers to two decimal points.) 3. HPC'sbreakeven point in annual sales units and sales dollars (roundanswers up, to nearest whole number). 4. HPC's required sales toreach a target before-tax profit (ÏB) of $75,000 for the year. Whatis the breakdown
of this overall level of subscriptions into Weekly and Monthlysubscriptions? (Round answers up to nearest whole number.)
5. What are the critical success factors for HPC? For its domesticsubscribers? For its international subscribers? How can CVPanalysis be used to make HPC more competitive?
