Break-Even Analysis Rotelco is one of the largest digital wireless service provi

Question

Break-Even Analysis 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 $50,100. Costs and expenses for the year were as follows: Assume that 70% of the cost of revenue and 25% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number.___accounts How much revenue per account mould be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar.$___per account.

Explanation / Answer

Hi,

The correct answer is as follows;

Total fixed cost = 0.30*24000+0.75*16500+5500

= 25075

Total variable cost = 0.70*24000+0.25*16500

= 20925

Variable cost per customer = 20295/1000

=20.295

1. Hence, Rotelco’s break-even number of acc = 25075/20.925

968.93

Or 969

2. total cost = 20295+25075

46000

Revenue per account needed = 45370/969

= 47.47

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