Ex 19-16 break-even analysis for a service company obj . 3 s p r i nt n e x t e l 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). a. what is sprint nextel’s break-even number of accounts, using the data and assumptions given? round units (accounts) and per-account amounts 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 constan

Instructions are listed below

Explanation:

Giving the following information:

In recent years, 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).

Break-even point= fixed costs/ contribution margin

Fixed costs= 20841*0.30 + 9765*0.70= 13,087.8

Unitary Variable costs= 20841*0.70 + 9765*0.30= 17,518.2/32.5= 539

Selling price=35,345/32.5= 1088

Break-even point= 13,088/ (1088 - 539)= 23.84 million suscribers

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 13,088/ [(1088 - 539)/1088]= 25,938 millions

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