ESPN and Fox Sports spent $4,200,000 on a promotional campaign for 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 to break even the cost of promotional campaign. Treat the campaign cost as fixed and revenue less variable cost per account period as the unit contribution margin.
ESPN and Fox Sports spent $4,200,000 on a promotional campaign for 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 to break even the cost of promotional campaign. Treat the campaign cost as fixed and revenue less variable cost per account period as the unit contribution margin.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ESPN and Fox Sports spent $4,200,000 on a promotional campaign for 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 to break even the cost of promotional campaign.
Treat the campaign cost as fixed and revenue less variable cost per account period as the unit
contribution margin.
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