Break-Even Analysis

Media outlets such as ESPN and Fox Sports often have web sites that provide in-depth coverage of news and events. Portions of these web sites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary. These web sites typically offer a free trial period to introduce viewers to the web site. Assume that during a recent fiscal year, ESPN.com spent $4,402,280 on a promotional campaign for its web site, offering two free months of service for new subscribers. In addition, assume the following information:

Number of months an average new customer stays with the service
(including the two free months)	18	months
Revenue per month per customer subscription	$32
Variable cost per month per customer subscription	$11

Determine the number of new customer accounts needed to break even on the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a Costs that tend to remain the same in amount, regardless of variations in the level of activity.fixed cost, and (2) treat the revenue less Costs that vary in total dollar amount as the level of activity changes.variable cost per account for the subscription period as the The dollars available from each unit of sales to cover fixed costs and provide income from operations.unit contribution margin.