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 $29,200. Costs and expenses for the year were as follows:

Assume that 75% of the cost of revenue and 40% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts).

a.  What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number.
accounts

b.  How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar.
$ per account

Cost of revenue $11,700 Selling, general, and administrative expenses 9,300 Depreciation 3,200

Explanation / Answer

COst of revenue=11700

Fixed=2925

Variable=8775

Selling, general, and administrative expenses=9300

Fixed=5580

variable=3720

Break even subscribers=(2925+5580+3200)/[(29200-8775-3720)/100]

=70

Break even subscribers=11705/(revenue per unit-124.95)

revenue per unit=117.05+124.95

=242

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