Break-even analysis for a service company Sprint Nextel is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 32.5 million direct subscribers (accounts) that generated revenue of $35,345 million. Costs and expenses for the year were as follows (in millions): Cost of revenue $20,841 Selling, general, and administrative expenses 9,765 Depreciation 2,239 Assume that 70% of the cost of revenue and 30% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place. b. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constant?
Break-even analysis for a service company Sprint Nextel is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 32.5 million direct subscribers (accounts) that generated revenue of $35,345 million. Costs and expenses for the year were as follows (in millions): Cost of revenue $20,841 Selling, general, and administrative expenses 9,765 Depreciation 2,239 Assume that 70% of the cost of revenue and 30% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place. b. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constant?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Break-even analysis for a service company
Sprint Nextel is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 32.5 million direct subscribers (accounts) that generated revenue of $35,345 million. Costs and expenses for the year were as follows (in millions):
| Cost of revenue | $20,841 |
| Selling, general, and administrative expenses | 9,765 |
| 2,239 |
Assume that 70% of the cost of revenue and 30% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place.
b. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constant?
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