Headlines Publishing Company (HPC) Specializes in International Business News Publications

question 52

Essay

Headlines Publishing Company (HPC) specializes in international business news publications. Its principal product is HPC-Monthly, which is mailed to subscribers the first week of each month. A weekly version, called HPC-Weekly, is also available to subscribers over the Web at a higher cost. Sixty percent of HPC's subscribers are nondomestic customers. The company experienced a fast growth in subscribers in its first few years of operation, but sales have begun to slow in recent years as new competitors have entered the market. HPC has the following cost structure and sales revenue for its subscription operations on a yearly basis. All costs and all subscription fees are in U.S. dollars. Required: Use these data to determine the following:
1. Contribution margin per unit for weekly and monthly subscriptions.
2. Contribution margin ratio for weekly and monthly subscriptions.
3. HPC's breakeven point in annual sales units and sales dollars (round answers up, to nearest whole number).
4. HPC's required sales to reach a target before-tax profit of $75,000 for the year. What is the breakdown of this overall level of subscriptions into Weekly and Monthly subscriptions?
5. What are the critical success factors for HPC? For its domestic subscribers? For its international subscribers? How can CVP analysis be used to make HPC more competitive?

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Definitions:

Budgeted Sales

The projected amount of sales, in units or revenue, a company expects to achieve during a specific period, often used for planning and performance evaluation purposes.

Merchandise Inventory

Represents the goods a company has in stock that are available for sale to customers.

Sales on Account

Revenue generated from sales where payment is yet to be collected, often recorded as accounts receivable.

Disbursements Section

A part of cash flow management that records cash outflows or payments made by a business during a specific period.