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).

1. a. What is Sprint’s break-even number of accounts, using the data and assumptions given? Round to one decimal place.
2. 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.