Hartford 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 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. Data Fixed Costs per year Variable Costs $378,000 Mailing Commission $0.70 per $3.50per subscription $2.00 per subscription issue Sales Mix (based on # of subscriptions): HPC-Weekly HPC-Monthly 25% 75% Selling Price HPC-Weekly HPC-Monthly $52.00 per subscription 20.00 per subscription Targeted after-tax pront, as a percent of sales dollars- Income tax rate (average) 10.00% 30.00% Required 1. Contribution margin per unit for weekly and for monthly subscriptions 2. Contribution margin ratio for weekly and for monthly subscriptions 3 a. HPC’s breakeven point in sales units and sales dollars. Use the weighted-average contribution margin approach and show calculations. (Hint: When calculating the weighted-average contribution margin per unit, the weights in the calculation are based on relative units sold. When calculating the weighted-average contribution margin ratio, the weights are based on relative sales dollars, not units, of the individual products.) b. At the overall breakeven point in units, what is the breakeven amount (in units) for each individual product? C. What is the breakeven amount (in sales dollars) for each product? 4. Explain the following quote: For the multiproduct (or multiservice) firm, there is no breakeven point independent ofthe sales mix assumption. 5. Prepare a data table for the breakeven volume and percentage change in the breakeven point from the base case (above) for each 1% change in sales mix over for HPC Weekly over the range 20% to 30% 6. What is the required sales level (in units), at the assumed sales mix, to reach a before-tax profit of $75,000? 7, What is the required sales level (in units), at the assumed sales mix to reach an after-tax profit equal to 10% of sales revenue? (Show calcula 8. What are the critical success factors for HPC? For its domestic subscribers? For its intemational subscribers?
