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6. To prepare for a new business venture selling novels, Sheldon Ross enrolls in business courses at the local community college, spending $4800 on the tuition. He also purchases business equipment at a cost of $15,000, and spends $3,000 on marketing expenses. For each book sold, it costs Sheldon $2.00 for materials and labor and $0.50 for website fees. Using the skills he learned in his business courses, Sheldon decides to charge $9.95 for each book.

a. How many books would have to be sold in order to break even?

b. If Sheldon sells 20 Books per day, how many days would it take to break even?

c. Sheldon’s competitors start to lose business and respond by cutting their prices. While Sheldon’s daily sales are steady at 20 units at the current price for the first 30 days, he realizes that he will have to cut his prices down to $8.95 after the initial 30 days in order to keep the demand level at 20 units/day. How long will it take for Sheldon to break even?

d. It is now 3 months (90 days) after the price decrease, and Sheldon still has not been able to break even. Since the amount he needs to make up was borrowed from his father, not breaking even means not being able to repay the loan. His friend Leonard offers to lend $2,000 for a new round of advertising on Facebook. With this new advertising campaign and the price still at $8.95, Sheldon doubles

 

 

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