Sb.25 me the number of new customer accounts needed to break even ont the promotional campaign. In forming your answer, (1) treat the cost campaign as a fixed cost, and (2) treat the revenue less variable cost per accou subscription period as the unit contribution margin. nts needed to break even on the cost of answer, (1) treat the cost of the promotional EET EX 21-16 Break-even analysis OBJ. 3 Sprint Nextel is one of the largest digital wireless service providers in the United a recent year, it had approximately 33.3 million direct subscribers (accounts) that generated revenue of $32,563 million. Costs and expenses for the year were as follows (in millions): Cost of revenue $17.492 Selling, general, and administrative expenses 9,418 Depreciation 5,074 (Continued) 1 Cost Behavior and Cost-Volume-Profit Analysis 1. and administra Assume that 75% of the cost of revenue and 25% of the selling, general, and ad tive 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 tions above? Round units (accounts) and per account amounts to one decimal b. How much revenue per account would be sufficient for Sprint Nextel to bran if the number of accounts remained constant? o the data and assump- one decimal place. Sprint Nextel to break even Home Insert Draw Page Layout Formulas Data Review View Help ECTED VIEW Be careful files from the Internet can contain viruses. Unless you need to edit it's safer to su J K L M B C D E F G H I ctions s are entered in the cells with gray backgrounds vith non-gray backgrounds are protected and cannot be edited. arisk (*) will appear to the right of an incorrect entry Break-Even (in accounts) = million (rounded) accounts Supporting calculations: Revenue per account (in Millions): Total revenue (in millions) Total accounts (in millions) Revenue per account (in Millions) Variable cost per account (in Millions): Variable Percentage Cost of revenue (in millions) Selling. gen., admin. exp. (in millions) Total variable costs Divided by number of accounts Variable cost per account (in millions) Total fored costs (in minions) Full Amount Fixed * Percentage Cost of revenue (in Millions) Selling gen, admin. exp. (in millions) Depreciation Total fored costs in millions) Ex. 21-16 J K L million (rounded) accounts Supporting calculations: Revenue per account (in millions): Total revenue (in millions) Total accounts (in millions) Revenue per account (in millions) Variable cost per account (in millions): Full Amount Variable Percentage X Cost of revenue (in Millions) Selling gen., admin. exp. (in millions) Total variable costs Divided by number of accounts Variable cost per account (in millions) Total fixed costs (in millions): Full Amount X Fixed Percentage Cost of revenue (in millions) Selling, gen., admin. exp. (in millions) Depreciation Total fixed costs (in millions) Break-even (in $ revenue, in millions): Total costs Divided by number of accounts Break-even million Ex. 21-16
