Break-even analysisMedia outlets such as ESPN and Fox Sports often have websites thatprovide in-depth coverage of news and events. Portions of thesewebsites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary. These websites typicallyoffer a free trial period to introduce viewers to the site. Assume thatduring a recent fiscal year, ESPN.com spent $4,200,000 on a promotionalcampaign for the ESPN .com website that offered two free months ofservice for new subscribers. In addition, assume the following Information: Number of months an average new customer stays with the service (including the two free months) 14 months Revenue per month per customer subscription $10.00 Variable cost per month per customer subscription $5.00 Determine the number of new customer accounts needed to break evenon the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a fixed cost and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin.
Break-even analysisMedia outlets such as ESPN and Fox Sports often have websites thatprovide in-depth coverage of news and events. Portions of thesewebsites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary. These websites typicallyoffer a free trial period to introduce viewers to the site. Assume thatduring a recent fiscal year, ESPN.com spent $4,200,000 on a promotionalcampaign for the ESPN .com website that offered two free months ofservice for new subscribers. In addition, assume the following Information: Number of months an average new customer stays with the service (including the two free months) 14 months Revenue per month per customer subscription $10.00 Variable cost per month per customer subscription $5.00 Determine the number of new customer accounts needed to break evenon the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a fixed cost and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Break-even analysis
Media outlets such as ESPN and Fox Sports often have websites that
provide in-depth coverage of news and events. Portions of these
websites are restricted to members who pay a monthly subscription to
gain access to exclusive news and commentary. These websites typically
offer a free trial period to introduce viewers to the site. Assume that
during a recent fiscal year, ESPN.com spent $4,200,000 on a promotional
campaign for the ESPN .com website that offered two free months of
service for new subscribers. In addition, assume the following Information:
| Number of months an average new customer stays with the service (including the two free months) | 14 months |
| Revenue per month per customer subscription | $10.00 |
| Variable cost per month per customer subscription | $5.00 |
Determine the number of new customer accounts needed to break even
on the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a fixed cost and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education