Question

EX 19-16 Break-even analysis for a service company Obj . 3 S p r i nt N e x t e l is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 32.5 million direct subscribers (accounts) that generated revenue of $35,345 million. Costs and expenses for the year were as follows (in millions): Cost of revenue $20,841 Selling, general, and administrative expenses 9,765 Depreciation 2,239 Assume that 70% of the cost of revenue and 30% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). A. What is Sprint Nextel’s break-even number of accounts, using the data and assumptions given? Round units (accounts) and per-account amounts to one decimal place. B. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constan

Answer 1

Instructions are listed below

Step-by-step explanation:

Giving the following information:

In recent years, it had approximately 32.5 million direct subscribers (accounts) that generated revenue of $35,345 million. Costs and expenses for the year were as follows (in millions): Cost of revenue $20,841 Selling, general, and administrative expenses 9,765 Depreciation 2,239 Assume that 70% of the cost of revenue and 30% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts).

Break-even point= fixed costs/ contribution margin

Fixed costs= 20841*0.30 + 9765*0.70= 13,087.8

Unitary Variable costs= 20841*0.70 + 9765*0.30= 17,518.2/32.5= 539

Selling price=35,345/32.5= 1088

Break-even point= 13,088/ (1088 - 539)= 23.84 million suscribers

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 13,088/ [(1088 - 539)/1088]= 25,938 millions