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Break-even analysis Media outlets such as ESPN and Fox Sports often have websites that provide in-depth coverage of news and events. Portions of these websites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary. These websites typically offer a free trial period to introduce viewers to the site. Assume that during a recent fiscal year, ESPN.com spent $4,200,000 on a promotional campaign for the ESPN .com website that offered two free months of service for new subscribers. In addition, assume the following Information: Number of months an average new customer stays with the service (including the two free months) 14 months Revenue per month per customer subscription $10.00 Variable cost per month per customer subscription $5.00 Determine the number of new customer accounts needed to break even on the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a fixed cost and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 21, Problem 21.15EX
Textbook Problem

Break-even analysis

Media outlets such as ESPN and Fox Sports often have websites that provide in-depth coverage of news and events. Portions of these websites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary. These websites typically offer a free trial period to introduce viewers to the site. Assume that during a recent fiscal year, ESPN.com spent $4,200,000 on a promotional campaign for the ESPN .com website that offered two free months of service for new subscribers. In addition, assume the following Information:

Number of months an average new customer stays with the service (including the two free months) 14 months
Revenue per month per customer subscription $10.00
Variable cost per month per customer subscription $5.00

Determine the number of new customer accounts needed to break even on the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a fixed cost and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin.

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Chapter 21 Solutions

Accounting
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