Updates now or try tonight? Later
eBook
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):
8,783
Cost of revenue
$13,389
Selling, general, and administrative expenses 7,774
Depreciation
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?
26.9 x million accounts
b. How much revenue per account would be sufficient for Sprint to break even if the number of accounts remained constant?
932.6 x million per account
Feedback
Check My Work
a. Fixed costs divided by unit contribution margin equals break-even point in units.