CableVision has been approached by the city of Miranda (population 800,000) to run its cable television operations. Miranda city officials have become tired of reporting losses on the cable television company they have operated for the past five years. CableVision currently operates cable television facilities for over 100 other cities or counties. After negotiations with Miranda officials, CableVision decided that the following assumptions are valid for planning:

• A basic set of ten cable television stations will be offered at a rate of $20 per month per subscriber. These ten stations include a sports channel, a news channel, and other general audience channels.
• The city of Miranda will retain ownership of the physical facilities and will maintain them in working condition. Under a leasing agreement, CableVision will pay the city of Miranda $50,000 per month plus 10% of the monthly revenues from the first 10,000 subscribers and 5% of the monthly revenues from any subscribers above 10,000.
• CableVision will receive the ten channels included in the basic service from Interlink Cable; Interlink acts as an intermediary between cable television stations and companies such as CableVision, which then sell to individual subscribers. Interlink charges a monthly fixed fee of $20,000 plus a monthly charge of $8 per subscriber for the first 20,000 subscribers and $6 per each subscriber above 20,000.
• CableVision estimates its own operating costs to include both a fixed and a variable component. The fixed component is $60,000 per month. The variable component is $2 per month per subscriber (to cover monthly billing, program news mailings, etc.).

1) What is the contribution margin per subscriber over the 0 to 30,000 subscriber range? Note that variable costs per subscriber change at different levels in this range, so you need to compute three different per subscriber contribution margins:

• Contribution margin per subscriber for 1-10,000 subscribers
• Contribution margin per subscriber for 10,001-20,000 subscribers
• Contribution margin per subscriber for 20,001-30,000 subscribers

2) What is the total operating income per month to CableVision with:

• 10,000 subscribers?
• 20,000 subscribers?
• 30,000 subscribers?