Break-even Analysis: It refers to an analysis of the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows: Break-even point in Sales ( units ) = Fixed Costs Contribution Margin per unit the number of new customer accounts needed to break even on the cost of the promotional campaign.

Question

Want to see the full answer?

Answer 1

Question

Chapter 19, Problem 19.15EX

To determine

Break-even Analysis: It refers to an analysis of the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:

Break-even point in Sales(units) =Fixed CostsContribution Margin per unit

the number of new customer accounts needed to break even on the cost of the promotional campaign.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

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 Variable cost per month per customer subscription $10.00 $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…

Media outlets 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 website. Assume that during a recent fiscal year, one outlet spent $2,686,200 on a promotional campaign for its 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) 20 months Revenue per month per customer subscription $20 Variable cost per month per customer subscription $7 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…

Service Industry AccountingThe Spectrum Fitness Club charges a nonrefundable annual membership fee of $1,200 for its services. For this fee, each member received a fitness evaluation (value $200), a monthly magazine (annual value $25), and two hours’ use of the equipment each week (annual value $1,100). Each of the three elements of the annual membership can be purchased separately. The initial direct costs to obtain the membership are $180. The direct cost of the fitness evaluation is $100, and the monthly direct costs to provide the other services are estimated to be $25 per person. Give the journal entries to record the transactions in 2019 relative to a membership sold on May 1, 2019.