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?

Question

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?

Quizplus · Accepted Answer

The Answer of 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?

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