Q4/A cell phone company has a fixed cost of $1000000 per month and a variable cost of $15 per month per subscriber. The company charges $35.95 per month to its cell phone customers. a. What is the breakeven point for this company? b. The company currently has 70000 subscribers and proposes to raise its monthly fees to $49.95 to cover add-on features such as text messaging, song downloads, game playing, and video watching. What is the new breakeven point if the variable cost increases to $20 per customer per month? c. If 10000 subscribers will drop their service because of the monthly fee increase in Part (b), will the company still be profitable?
Q4/A cell phone company has a fixed cost of $1000000 per month and a variable cost of $15 per month per subscriber. The company charges $35.95 per month to its cell phone customers. a. What is the breakeven point for this company? b. The company currently has 70000 subscribers and proposes to raise its monthly fees to $49.95 to cover add-on features such as text messaging, song downloads, game playing, and video watching. What is the new breakeven point if the variable cost increases to $20 per customer per month? c. If 10000 subscribers will drop their service because of the monthly fee increase in Part (b), will the company still be profitable?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Q4/A cell phone company has a fixed cost of $1000000 per month and a variable cost of $15
per month per subscriber. The company charges $35.95 per month to its cell phone customers.
a. What is the breakeven point for this company?
b. The company currently has 70000 subscribers and proposes to raise its monthly fees to
$49.95 to cover add-on features such as text messaging, song downloads, game playing, and
video watching. What is the new breakeven point if the variable cost increases to $20 per
customer per month?
c. If 10000 subscribers will drop their service because of the monthly fee increase in Part (b),
will the company still be profitable?
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