Break-even analysis for a service companySprint Nextel 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$20,841Selling, general, and administrative expenses9,765Deprecation2239Assume 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 constant?

Breakeven revenue is that level of revenue at which business is only recovering its fixed and…

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 16E: Break-even analysis for a service company3 Sprint Corporation (S) is one of the largest digital...

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Break-even analysis for a service company
Sprint Nextel 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	$20,841
Selling, general, and administrative expenses	9,765
Deprecation	2239

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 constant?

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