Sprint Nextel is one of the largest digital wireless service providers in the Un
ID: 2517041 • Letter: S
Question
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. Costs and expenses for the year were as follows (in millions):
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 Selling, general, and administrative expenses Depreciation Assume that 70% o the cost of revenue and 30% of the selling, general and administrative expenses are variable to the nu mber o direct subscribers accounts (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? $20,841 9,765 2,239 at Xmillion 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 accountExplanation / Answer
Revenue = $35,345 Million / 32.5 mil = $1087.5 Revenue per subscribers
Cost of revenue - $20841 x 70% = 14588.7 Variable and $6252.3 Fixed
Selling,General $ Admin - $9765 x 30% = $2929.5 Variable and $6835.5 Fixed
Contribution Margin: $35,345 - $14588.7 - $2929.5 = $17826.8 mil, or 50.4%
Contribution per Account = $17826.8 mil / 32.5 mil = $548.5
Fixed Costs = $6252.3 + $6835.5 = $13087.8
(a) Break-Even Numbe of Accounts
= $13087.8 mil / CM per acct $548.50
= 23.86 Million Direct Subscribers
(b) Revenue per Account would be $1087.5 Million per direct subscribers
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