Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 6, Problem 16E
Break-even analysis for a service company3
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):
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).
- a. What is Sprint’s break-even number of accounts, using the data and assumptions given? Round to one decimal place.
- b. How much revenue per account would be sufficient for Sprint to break even if the number of accounts remained constant? Round to one decimal place.
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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
Break-Even Analysis for a Service Company
Sprint Corporation is one of the largest digital wireless
service providers in the United States. In a recent year,
it had approximately 32.6 million direct subscribers
(accounts) that generated revenue of $33,600 million.
Costs and expenses for the year were as follows (in
millions):
Cost of revenue
Selling, general, and administrative expenses
Depreciation
$13,389
7,774
8,783
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.
a. What is Sprint's break-even number of accounts,
using the data and assumptions given?
27.2 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
Break-even analysis for a service company
Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $61,300. Costs and expenses for the year were as follows:
Cost of revenue
$28,800
Selling, general, and administrative expenses
19,600
Depreciation
6,700
Assume that 75% of the cost of revenue and 30% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place.
a. What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number.fill in the blank 1 accounts
b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar.$fill in the blank 2 per account
Chapter 6 Solutions
Managerial Accounting
Ch. 6 - Describe how total variable costs and unit...Ch. 6 - Which of the following costs would be classified...Ch. 6 - Describe how total fixed costs and unit fixed...Ch. 6 - Prob. 4DQCh. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - What does operating leverage measure, and how is...
Ch. 6 - High-low method The manufacturing costs of...Ch. 6 - Contribution margin Waite Company sells 250,000...Ch. 6 - Prob. 3BECh. 6 - Prob. 4BECh. 6 - Prob. 5BECh. 6 - Operating leverage Haywood Co. reports the...Ch. 6 - Margin of safety Jorgensen Company has sales of...Ch. 6 - Classify Costs Following is a list of various...Ch. 6 - Identify cost graphs The following cost graphs...Ch. 6 - Identify activity bases For a major university,...Ch. 6 - Prob. 4ECh. 6 - Identify fixed and variable costs Intuit Inc....Ch. 6 - Relevant range and fixed and variable costs Child...Ch. 6 - High-low method Ziegler Inc. has decided to use...Ch. 6 - Prob. 8ECh. 6 - Contribution margin ratio Young Company budgets...Ch. 6 - Contribution margin and contribution margin ratio...Ch. 6 - Prob. 11ECh. 6 - Break-even sales Anheuser-Busch InBev SA/NV (BUD)...Ch. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Break-even analysis for a service company3 Sprint...Ch. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Prob. 22ECh. 6 - Prob. 23ECh. 6 - Prob. 24ECh. 6 - Prob. 25ECh. 6 - Classify costs Seymour Clothing Co. manufactures a...Ch. 6 - Break-even sales under present and proposed...Ch. 6 - Prob. 3PACh. 6 - Prob. 4PACh. 6 - Prob. 5PACh. 6 - Contribution margin, break-even sales,...Ch. 6 - Classify costs Cromwell Furniture Company...Ch. 6 - Prob. 2PBCh. 6 - Prob. 3PBCh. 6 - Prob. 4PBCh. 6 - Prob. 5PBCh. 6 - Contribution margin, break-even sales,...Ch. 6 - Analyze Global Airs cost-volume-profit...Ch. 6 - Prob. 2MADCh. 6 - Prob. 3MADCh. 6 - Prob. 4MADCh. 6 - Prob. 1TIFCh. 6 - Prob. 3TIFCh. 6 - Profitability strategies Somerset Inc. has...Ch. 6 - Prob. 5TIFCh. 6 - Analysis of costs for a shipping department Sales...Ch. 6 - Taylor Corporation is analyzing the cost behavior...Ch. 6 - Prob. 2CMACh. 6 - Bolger and Co. manufactures large gaskets for the...Ch. 6 - Prob. 4CMA
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