Analyze Star Stream's cost-vol ume-profit relationshipsStar Stream is a subscription-based video streaming service. Subscribers pay $120 per year for the service. Star Stream licenses and develops content for itssubscribers. In addition, Star Stream leases servers to hold this content. These costs are not variable to the number of subscribers, but must be incurredregardless of the subscriber base. In addition, Star Stream compensates telecommunication companies for bandwidth so that Star Stream customers receivefast streaming services. These costs are variable to the number of subscribers. These and other costs are as follows: Enter your answers in whole dollars.Server lease costs per year$100,000,000Content costs per year2,000,000,000Fixed operating costs per year900.000,000Bandwidth costs per subscriber per year15Variable operating costs per subscriber per year25a. Determine the break-even number of subscribers.subscribersb. Assume Star Stream planned to increase available programming and thus increase the annual content costs to $2,600,000,000. What impact would thischange have on the break-even number of subscribers?Break-even number of subscribers willsubscribers.toc. Assume the same content cost scenario as in (b). How much would the annual subscription need to change in order to maintain the same break-even as in(a)?from $in order to maintain the same break-even as in (a)to $The annual subscription need to

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Asked Nov 11, 2019
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Analyze Star Stream's cost-vol ume-profit relationships
Star Stream is a subscription-based video streaming service. Subscribers pay $120 per year for the service. Star Stream licenses and develops content for its
subscribers. In addition, Star Stream leases servers to hold this content. These costs are not variable to the number of subscribers, but must be incurred
regardless of the subscriber base. In addition, Star Stream compensates telecommunication companies for bandwidth so that Star Stream customers receive
fast streaming services. These costs are variable to the number of subscribers. These and other costs are as follows: Enter your answers in whole dollars.
Server lease costs per year
$100,000,000
Content costs per year
2,000,000,000
Fixed operating costs per year
900.000,000
Bandwidth costs per subscriber per year
15
Variable operating costs per subscriber per year
25
a. Determine the break-even number of subscribers.
subscribers
b. Assume Star Stream planned to increase available programming and thus increase the annual content costs to $2,600,000,000. What impact would this
change have on the break-even number of subscribers?
Break-even number of subscribers will
subscribers.
to
c. Assume the same content cost scenario as in (b). How much would the annual subscription need to change in order to maintain the same break-even as in
(a)?
from $
in order to maintain the same break-even as in (a)
to $
The annual subscription need to
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Analyze Star Stream's cost-vol ume-profit relationships Star Stream is a subscription-based video streaming service. Subscribers pay $120 per year for the service. Star Stream licenses and develops content for its subscribers. In addition, Star Stream leases servers to hold this content. These costs are not variable to the number of subscribers, but must be incurred regardless of the subscriber base. In addition, Star Stream compensates telecommunication companies for bandwidth so that Star Stream customers receive fast streaming services. These costs are variable to the number of subscribers. These and other costs are as follows: Enter your answers in whole dollars. Server lease costs per year $100,000,000 Content costs per year 2,000,000,000 Fixed operating costs per year 900.000,000 Bandwidth costs per subscriber per year 15 Variable operating costs per subscriber per year 25 a. Determine the break-even number of subscribers. subscribers b. Assume Star Stream planned to increase available programming and thus increase the annual content costs to $2,600,000,000. What impact would this change have on the break-even number of subscribers? Break-even number of subscribers will subscribers. to c. Assume the same content cost scenario as in (b). How much would the annual subscription need to change in order to maintain the same break-even as in (a)? from $ in order to maintain the same break-even as in (a) to $ The annual subscription need to

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Expert Answer

Step 1

(a)

 

The break-even number of subscribers is 37,500,000.

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Compute the break-even subscribers: Break even Total Fixed Costs sub scribers Contribution Margin $3,000,000,000 $80 37,500,000 Compute the contribution margin: (Price per subscriber - Contribution Margin Vaniable costs per subscriber -($120-(S15+$25)) =$120-$40 =$80 Compute the fixed costs: Total Fixed Server lea se costs + Content costs Operating costs - $100,000,000+S2,000,000,000+S 900,000,000 Costs $3,000,000,000

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Step 2

(b)

 

The new break-even number of subscribers ...

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Compute the increase of costs on the break-even subscriber number: Break even Total Fixed Costs sub scribers Contribution Margin $3,600,000,000 $80 - 45,000,000 Compute the fixed costs: Server lea se costs + Content Total Fixed Costs costs+ Operating costs =$100,000,000+$2,600,000,000+$ 900,000,000 = $3,600000,000

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