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 To compute: Company SN’s break-even number of accounts.

Question

Break-even analysis for a service company Sprint Corporation (S) is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 60 million direct subscribers (accounts) that generated revenue of $33,347 million. Costs and expenses for the year were as follows (in millions): Cost of revenue Selling, general, and administrative expenses Depreciation and amortization $14,958 7,994 8,150 Assume that 30% of the cost of revenue and 70% of the selling, general, and administrative expenses are fixed to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place. a. What is Sprint's break-even number of accounts, using the data and assumptions given? million accounts b. How much revenue per account would be sufficient for Sprint to break even if the number of accounts remained constant? million per account

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Chapter 21, Problem 21.16EX

a.

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

To compute: Company SN’s break-even number of accounts.

b.

To determine

To compute: the revenue per account for break-even if the number of accounts remains constant.

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Break-even analysis for a service company Sprint Corporation (S) is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 60 million direct subscribers (accounts) that generated revenue of $33,347 million. Costs and expenses for the year were as follows (in millions): Cost of revenue Selling, general, and administrative expenses Depreciation and amortization $14,958 7,994 8,150 Assume that 30% of the cost of revenue and 70% of the selling, general, and administrative expenses are fixed to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place. a. What is Sprint's break-even number of accounts, using the data and assumptions given? million accounts b. How much revenue per account would be sufficient for Sprint to break even if the number of accounts remained constant? million per account

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