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Chrome File Edit View History Bookmarks People Window Help ?4)) 99%ED Tue 5:41 PM QE MindTap - Cengage Learning ? ng.cengage.com/static/nb/ui/index.html?nbid=4351 39&nbNodeld;=151682573&eISBN;:9781337270724#!&parentld;=151682594 MINDTAP Desmond Baloun? Chapter 19: Cost-Volume-Profit Analysis Financial and Managerial Accounting Chapter Contents Obj. 3 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): EXCEL TEMPLATE A Z REAL WORLD Cost of revenue Selling, general, and administrative expenses 9,765 Depreciation $20,841 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) A. What is Sprint Nextel's break-even number of accounts, using the data and assumptions given? Round units (accounts) and per-account amounts to one decimal place. B. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constant? javascript void (0) 27 Z,

Explanation / Answer

A. Break even point in units = Fixed cost/contribution per account=15326.8/548.5=$27.9 million Notes: Revenue per account (in millions) Total revenue 35345 Total accounts 32.5 Revenue per account 1087.5 Variable cost per account: In millions In millions Full amount Variable % Cost of revenue 20841 70% 14588.7 Selling,general and admin expense 9765 30% 2929.5 Total variable cost 17518.2 divided by number of accounts 32.5 Variable cost per account 539.0 Total fixed costs In millions In millions Full amount Fixed % Cost of revenue 20841 30% 6252.3 Selling,general and admin expense 9765 70% 6835.5 Depreciation 2239 100% 2239 Total fixed costs 15326.8 Contribution per account=Revenue per account-variable cost per account=1087.5-539=$548.5 B. Break-even (in $ reveue,in millions) Total costs (20841+9765+2239) 32845 Divided by number of accounts 32.5 Break-even 1010.6

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