Break-even analysis for a service company
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe8dbb38b-67db-4869-a2fb-b3f37c286b0c%2F8d404f6e-7517-4488-8a94-13c78921a465%2F3wdtr6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**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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