Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
26th Edition
ISBN: 9781337498159
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 21, Problem 21.15EX
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:
To compute: the number of new customer accounts needed to break even on the cost of the promotional campaign.
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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:
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14 months
Revenue per month per customer subscription
$10.00
Variable cost per month per customer subscription
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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)…
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
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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…
Chapter 21 Solutions
Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
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