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.

Question

Quizplus · Accepted Answer

Required:Use these data to determine the following:
(1)Contribution margin for weekly and monthly subscriptions.
(2)Contribution margin ratio for weekly and monthly subscriptions.
(3)HPC's breakeven point in sales units and sales dollars.
(4)HPC's breakeven point to reach a target before-tax profit of $75,000.
(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?
Please see Feedback for answers.
 Feedback: 11ea6e70_bcca_5362_8f54_63493067ceca_TB1699_00 Selling Price ($47.00)- Total Variable Cost ($35.70)= $11.30 Contribution Margin per Unit 11ea6e70_bcca_5363_8f54_2df0176fb203_TB1699_00 Selling Price ($19.00)- Total Variable Cost ($11.70)= $7.30 Contribution Margin Per Unit
(2)Contribution Margin Ratio Weekly: $11.30/$47.00 = 24% Monthly: $7.30/$19.00 = 38.42%
(3)$11.30 X.20 = $2.26 HPC-Weekly;$7.30 X.80 = $5.84 HPC-Monthly;$8.10 weighted average Contribution Margin $306,000/$8.10 = 37,778 subscriptions (7,556 for HPC-weekly;30,222 for HPC-monthly)
(4)Breakeven Point for Target Before Tax Profit of $75,000 $306,000 + $75,000 = $381,000 $381,000/$8.10 = 47,037 (9,407 for HPC-weekly;37,630 HPC-monthly)
(5)The point of this question is to get the students started thinking about the competitive context in which the firm operates.There are many different relevant points that could be made.If the discussion is slow to start,ask them to think about what a firm like HPC must do to be competitive.There are a number of critical success factors that are likely to be important for both domestic and foreign subscriptions.These would include quality of presentation and timeliness and accuracy of information,as well as competitive price.However,other factors will differ across countries.For example,in some countries the cost of distribution including selling and handling costs are quite high,so that it is critical in these countries to devise new ways to deliver the subscriptions profitably.Other factors include changes in literacy rates,the business climate,and investment opportunities in different countries.

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