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Break-even analysis for a service company Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it
Break-even analysis for a service company Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $61,100. Costs and expenses for the year were as follows: $26,900 Cost of revenue Selling, general, and administrative expenses Depreciation 16,500 6,700 Assume that 60% of the cost of revenue and 20% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place. a. What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number. 62 X accounts b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar. $ 455 x per account Feedback Check My Work a. Fixed costs divided by unit contribution margin equals break-even point in units. b. Fixed costs divided by X - variable costs equals number of subscribers. Solving for X will result in the break-even revenue per account. Contribution Margin and Contribution Margin Ratio For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions): Sales $39,400 Food and packaging Payroll Occupancy (rent, depreciation, etc.) General, selling, and administrative expenses $16,582 9,900 6,038 5,700 $38,220 Income from operations $1,180 Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses. a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) million b. What is Wicker Company's contribution margin ratio? Round to one decimal place. C. How much would income from operations increase if same-store sales increased by $2,400 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. million $
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