Break-Even Analysis for a Service Company Rotelco is a digital wireless service provider in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $42,700. Costs and expenses for the year were as follows: Cost of revenue $18,800 Selling, general, and administrative expenses 11,500 Depreciation 4,700 Assume that 70% of the cost of revenue and 35% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations to two decimal place and final answers to the nearest whole number. a. What is Rotelco's break-even number of accounts, using the data and assumptions above? X accounts b. How much revenue per account would be sufficient for Rotelco to break even the number of accounts remained constant? X per account
Break-Even Analysis for a Service Company Rotelco is a digital wireless service provider in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $42,700. Costs and expenses for the year were as follows: Cost of revenue $18,800 Selling, general, and administrative expenses 11,500 Depreciation 4,700 Assume that 70% of the cost of revenue and 35% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations to two decimal place and final answers to the nearest whole number. a. What is Rotelco's break-even number of accounts, using the data and assumptions above? X accounts b. How much revenue per account would be sufficient for Rotelco to break even the number of accounts remained constant? X per account
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Transcribed Image Text:Break-Even Analysis for a Service Company
Rotelco is a digital wireless service provider in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $42,700. Costs and expenses
for the year were as follows:
Cost of revenue
$18,800
Selling, general, and administrative expenses
11,500
Depreciation
4,700
Assume that 70% of the cost of revenue and 35% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all
interim calculations to two decimal place and final answers to the nearest whole number.
a. What is Rotelco's break-even number of accounts, using the data and assumptions above?
X accounts
b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant?
X per account
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Step 1: Introduce to break even point
VIEWStep 2: Working for variable cost of revenue and fixed cost of revenue
VIEWStep 3: Working for variable and fixed selling, general & administrative expenses
VIEWStep 4: Working for total fixed cost, variable cost per account and contribution margin per account
VIEWStep 5: Working for break even number of account
VIEWStep 6: Working for break even revenue per account
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