Elephant Books Sells Paperback Books for $7 Each

question 6

Multiple Choice

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 much 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
• E) None of the above

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