Brockway & Coates - Murphy Final
Brockway & Coates - Murphy Final
Problem in publication of
Senators Autobiography
INTRODUCTION
Senator Murphy
82 Yrs Old
Served in US house representatives for 16 yrs
Planned to retire before his expiry term during his 40th anniversary of
his becoming a sentor
Widely respected influence voice in Capitol Hill
Planned to write an Autobiography
B & C probed him for the likely content of Serving Time
He expects to receive 500,000 Dollars to sign the deal and 500,000
dollars upon delivery of Manuscript
DISCUSSION AT B & C
Critical Points
Sales Expected
Amount to be paid to Murphy
The book which is to be released is an election year.
Age of Senator Risk of old age
Whether the contents of the book would be exciting or not
Uncertainty of sales Amount ( 30$ at Retail stores, $15 at
Wholesale ) )
30% probability sales of 1,000000
40% probability sales of 400,000
30% probability sales of 100,000
COST
Cost Involved in Publishing the book:
Writing, Editing, proof reading, permissions, Photographs etc ( Will
incur even if Company do not publish the book ): $ 100,000
Printing
CALCULATION OF SALES
CALCULATION OF COST
Payable to Murphy : 500000 + (.80 x 500000) =
$900,000
Editorial Services: $1, 50,000
Printing Cost: 490000 x 4 = $ 1, 960,000
Distribution Cost: 490000 x .25= $122,500
Marketing Cost: $ 367500
Advt Cost: $ 500000
Royalty Deal
500000 x .8= 400000, + 699019 = 1099019
A)Ans
HIGHER
OR LOWER THAN $30?
B)
Ans. Reduction in price, sales will increase and Senator will get
more royalty
Q5.(A) How many books B&C should order from the printer under the
flat deal and royalty deal? Which deal would lead to the larger order
from the printer?
Answer
Under Fee Flat Deal - 490,000 copies, provided that all other
information provided for the purpose of this case will not change.
Under the royalty deal We expect as a group that B&C should order
slightly more than 490,000 copies.
It is because it will ,cover the additional cost incurred due to royalty
fee as compared to the flat deal rate.
B)