5:15 s3.lite.msu.edu AT&T; 95%. This problem contains three parts. In Part A, yo

Question

5:15 s3.lite.msu.edu AT&T; 95%. This problem contains three parts. In Part A, you are asked to determine the parameters of the profit function the contribution margin and the fixed costs. You should not move on to Parts B and C until you get Part A correct, or until you use up all of your tries. The correct profit function parameters will be given to you after you have completed Part A you should use these parameters in Parts B and C. The problem is worth 20 points. Parts A and B are worth eight points each; Part C is worth four points. To get the eight points for Part A, you must answer both questions correctly; to get the eight points for Part B, you must all four questions correctly. You get six tries on Part A, eight on Part B, and four on Part C. CableVision has been approached by the City of Mirada to run its cable operations in 2016. After negotiating with key parties, CableVision has made the following agreements: It will offer Mirada residents a basic set of 25 cable television stations at a rate of $32.49 per month e CableVision will pay the city $110,000 per month plus $3.50 per cable subscriber per month to maintain the physical facilities. * CableVision will actually pay another company an annual fixed fee of $790,000 plus $7.50 per cable subscriber per month to broadcast the 25 channels CableVision estimates that operating costs for billing, program news mailings, etc. will be $120,000 per month plus 9% of monthly revenue. CableVision has several questions about its monthly revenues, costs, and profits in 2016.

Explanation / Answer

Cable Vision Contribution margin statement Details Variable Amt/subscriber per month Total Amt per month Subscribers                21,000 nos Revenue                  32.49              682,290 Variable payment to City                      3.50                 73,500 Variable pay to another company                    7.50              157,500 Operating cost @9% of sales revenue                    2.92                 61,406 Total Variable cost              292,406 Total contribution margin              389,884 Required earning                   26,000 Maximum fixed cost /month              363,884 Less Fixed payment to cable city/month              110,000 Less Fixed payment to another company/month=790000/12=                 65,833 Maximum Fixed operating cost /month $    188,050.57

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