Question
In: Accounting
Break-even analysis for a service company Sprint Nextel is one of the largest digital wireless service...
Break-even analysis for a service company
Sprint Nextel is one of the largest digital wireless service
providers in the United States. In a recent year, it had
approximately 32.5 million direct subscribers (accounts) that
generated revenue of $35,345 million. Costs and expenses for the
year were as follows (in millions):
| Cost of revenue | $20,841 |
| Selling, general, and administrative expenses | 9,765 |
| Depreciation | 2,239 |
Assume that 70% of the cost of revenue and 30% 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 Sprint Nextel's break-even number of
accounts, using the data and assumptions given?
million accounts
b. How much revenue per account would be
sufficient for Sprint Nextel to break even if the number of
accounts remained constant?
$ million per account
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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in the United States. In a recent year, it had approximately 100
direct subscribers (accounts) that generated revenue of $52,900.
Costs and expenses for the year were as follows:
Cost of revenue
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Selling, general, and administrative expenses
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Depreciation
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Sprint Nextel is one of the largest digital wireless service providers in the United States. In...
Sprint Nextel is one of the largest digital wireless service
providers in the United States. In a recent year, it had
approximately 32.5 million direct subscribers (accounts) that
generated revenue of $35,345 million. Costs and expenses for the
year were as follows (in millions): Cost of revenue $20,841
Selling, general, and administrative expenses 9,765 Depreciation
2,239 Assume that 70% of the cost of revenue and 30% of the
selling, general, and administrative expenses are variable to the
number of direct...
Rotelco is one of the largest digital wireless service providers in the United States. In a...
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 $28,400.
Costs and expenses for the year were as follows: Cost of revenue
$13,900 Selling, general, and administrative expenses 9,400
Depreciation 3,100 Assume that 75% of the cost of revenue and 20%
of the selling, general, and administrative expenses are variable
to the number of direct subscribers (accounts). a. What is...
Rotelco is one of the largest digital wireless service providers in the United States. In a...
Rotelco is one of the largest digital wireless service providers
in the United States. In a recent year, it had approximately 100
million direct subscribers (accounts) that generated revenue of
$31,100 million. Costs and expenses for the year were as
follows:
Cost of revenue
$14,600
Selling, general, and administrative expenses
10,000
Depreciation
3,400
Assume that 70% of the cost of revenue and 30% of the selling,
general, and administrative expenses are variable to the number of
direct subscribers (accounts).
a....
Rotelco is one of the largest digital wireless service providers in the United States. In a...
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Depreciation
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general, and administrative expenses are variable to the number of
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Rotelco is one of the largest digital wireless service providers in the United States. In a...
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in the United States. In a recent year, it had approximately 100
million direct subscribers (accounts) that generated revenue of
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follows:
Cost of revenue
$22,300
Selling, general, and administrative expenses
17,900
Depreciation
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general, and administrative expenses are variable to the number of
direct subscribers (accounts).
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How is break-even calculated?
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What are the risks if break-even is not analyzed
carefully?
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