**Break-even Analysis for a Service Company**Sprint Corporation (S) is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 60 million direct subscribers (accounts) that generated revenue of $33,347 million. Costs and expenses for the year were as follows (in millions):- Cost of revenue: $14,958- Selling, general, and administrative expenses: $7,994- Depreciation and amortization: $8,150Assume that 30% of the cost of revenue and 70% of the selling, general, and administrative expenses are fixed relative to the number of direct subscribers (accounts).**In part (a) and (b), round all interim calculations and final answers to one decimal place.**a. What is Sprint’s break-even number of accounts, using the data and assumptions given? [ ] million accountsb. How much revenue per account would be sufficient for Sprint to break even if the number of accounts remained constant? $[ ] million per account

The break-even point refers to the level of production at which the total cost of production is…

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Business

Accounting

Break-even analysis for a service company

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

**Break-even Analysis for a Service Company**

Sprint Corporation (S) is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 60 million direct subscribers (accounts) that generated revenue of $33,347 million. Costs and expenses for the year were as follows (in millions):

- Cost of revenue: $14,958
- Selling, general, and administrative expenses: $7,994
- Depreciation and amortization: $8,150

Assume that 30% of the cost of revenue and 70% of the selling, general, and administrative expenses are fixed relative to the number of direct subscribers (accounts).

**In part (a) and (b), round all interim calculations and final answers to one decimal place.**

a. What is Sprint’s break-even number of accounts, using the data and assumptions given?
[ ] million accounts

b. How much revenue per account would be sufficient for Sprint to break even if the number of accounts remained constant?
$[ ] million per account

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