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BH Press is a 30 year old U.S based publishing company (hence all prices reported in U.S dollars) which markets a range of printed material and literature. They are looking to enter the UAE market with the introduction of the bestseller Landscapes of the UAE'. There is fierce competition in the publishing industry for public awareness and distribution space in retail establishments for a publishing firm's assortment of books.

Production costs for a book are well known. There is a one-time setup cost for the initial printing estimated at $168000. Paper printing costs are $0.01 per page, and front-back covers cost is $0.2 per book.

Landscapes of the UAE is an epic book of 1000 pages, will sell at retail for $57.50 retail. BH Press, as does most publishers, uses a two-tiered distribution system. For example, BH Press publishes books at its New York factory, and ships them to book wholesalers in the UAE who, in turn, sell and distribute the books to the retailers. The wholesaler normally earns $4 per book (i.e. this is how much extra they charge over the manufacturers price). The retailer has a 32% margin.

BH Press is prepared to promote the introduction of Landscapes of the UAE at all trade levels and has allocated $170,000 for trade magazine advertising directed at regional and local wholesalers. There are trade shows in Abu Dhabi, Dubai, Sharjah, RAK and Fujairah, which BH Press plans to attend and use special events and point-of-sale materials to get the attention of the major retail book stores attending the show. BH Press has allocated $12,000 for each trade show. Additionally, a direct-mail campaign to all the bookstores has been developed for a total cost of $4,375

Newspaper advertising is budgeted at $175,000, while sales force selling expenses to introduce the book are set at $30,000. Salespeople for BH Press call on the regional wholesalers. As an incentive, a salesperson makes $0.25 commission for each book sold to this group of wholesalers.

Questions:

a) What level of dollar sales (revenue) and volume (number of books sold) is required to achieve break even?

b) What level of dollar sales (revenue) and volume (number of books sold) is required to achieve a profit objective of $25,000?

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