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 $2,410,870 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) 23 months Revenue per month per customer subscription $25 Variable cost per month per customer subscription $8 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 fixed cost, and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin. accountsBreak-Even Sales Under Present and Proposed Conditions Kearney Company, operating at full capacity, sold 163,500 units at a price of 548 per unit during 20Y5. Its income statement for 20Y5 is as follows: Sales 57,343,000 Cost of goods sold (2,784,000) Gross prnt $5,064,000 Expenses: Selling expenses $1,392,000 Administrative expenses 832,000 Total expenses (2,224,000) ) Operating income 52,340,000 The division of costs between fixed and variable is as follows: Fixed Variable Cost of good said 40% 60% Selling expenses 50% 50% Administrative expenses 70% 30% Management is considering a plant expansion program that will permit an increase of $624,000 (13,000 units at $48 per unit) in yearly sales. The expansion will increase fixed costs by $83,200, but will not affect the relationship between sales and variable costs. Instructions: 1. Determine for 20Y5 the total fixed costs and the total variable costs. Total fixed costs Total variable costs 2. Determine for 20Y5 (a) the unit variable cost and (b) the unit contribution margin. a. Unit variable cost per unit b. Unit contribution margin per unit 3. Compute the break-even sales (units) for 20Y5. units 4. Compute the break-even sales (units) under the proposed program. units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $2,840,000 of operating income that was earned in 20Y5. units 6. Determine the maximum operating income possible with the expanded plant. $ 7. If the proposal is accepted and sales remain at the 20Y5 level, what will be the operating income or loss for 20Y6? 8. Assuming a lack of market research, disadvantages for expanding the plant include all of the following except: a. The break-even point increases. b. The sales necessary to maintain the current income from operations must increase in excess of 20Y5 sales. c. If future sales remain at the 20Y5 level, the income from operations will decline. d. The maximum income from operations possible with the expanded plant is less than the current income from operations