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Financial Maths, STD2 EQ-Bank 19

Michael is a children's book author. His publisher printed 25000 copies of his new book and after 6 months there are 9200 copies left in stock. Michael receives 12% of the retail price as royalties.

  1. How many copies of Michael's book were sold?   (1 mark)
  2. Calculate Michael's royalty payment if the retail price is $19.95.   (2 marks)
  3. The publisher decides to sell the remaining stock at a reduced price of $15.00 per book. Calculate Michael's total royalty payment if all the remaining books are sold at this price.   (2 marks)
Show Answers Only

a.    \(15\,800\ \text{copies}\)

b.    \($37\,825.20\)

c.    \($54\,385.20\)

Show Worked Solution

a.    \(\text{Copies sold}\ =25\,000-9200\ =15\,800\ \text{copies}\)

b.    \(\text{Total sales}\ =15\,800\times 19.95=$315\,210\)

\(\text{Royalty payment}\) \(=12\% \times 315\,210\)
  \(= 0.12\times 315\,210\)
  \(=$37\,825.20\)

 

c.    \(\text{Sales from remaining books}\ =9200\times 15.00\ =$138\,000\)

\(\text{Total royalty on remaining books}\ =0.12\times 138\,000=$16\,560\)

\(\text{Total royalty when all books sold}\ = 37\,825.20 + 16\,560\ =$54\,385.20\)

\(\therefore\ \text{Michael’s total royalty payment is }$54\,385.20\)