5:15 s3.lite.msu.edu AT&T; 95%. This problem contains three parts. In Part A, yo

Question

5:15 s3.lite.msu.edu AT&T; 95%. This problem contains three parts. In Part A, you are asked to determine the parameters of the profit function the contribution margin and the fixed costs. You should not move on to Parts B and C until you get Part A correct, or until you use up all of your tries. The correct profit function parameters will be given to you after you have completed Part A you should use these parameters in Parts B and C. The problem is worth 20 points. Parts A and B are worth eight points each; Part C is worth four points. To get the eight points for Part A, you must answer both questions correctly; to get the eight points for Part B, you must all four questions correctly. You get six tries on Part A, eight on Part B, and four on Part C. CableVision has been approached by the City of Mirada to run its cable operations in 2016. After negotiating with key parties, CableVision has made the following agreements: It will offer Mirada residents a basic set of 25 cable television stations at a rate of $32.49 per month e CableVision will pay the city $110,000 per month plus $3.50 per cable subscriber per month to maintain the physical facilities. * CableVision will actually pay another company an annual fixed fee of $790,000 plus $7.50 per cable subscriber per month to broadcast the 25 channels CableVision estimates that operating costs for billing, program news mailings, etc. will be $120,000 per month plus 9% of monthly revenue. CableVision has several questions about its monthly revenues, costs, and profits in 2016.

Explanation / Answer

Sale price Per month per subscriber $32.49 Variable Cost Maintainence Physical Activities Per subsciber per month 3.5 Broadcast fees per subsciber per month 7.5 Operating cost 9% of monthly revenue $2.92 Maintainence Physical Activities 110000 Annual fixed Fees $790,000 Operating Cost 120000 ans 1 No. of residents 16000 Sales 519840 Variable Cost Maintainence Physical Activities Per subsciber per month 56000 Broadcast fees per subsciber per month 120000 Operating cost 9% of monthly revenue 46785.6 Toytral Variable Cost 222785.6 Contribution margin 297054.4 Contribution margin per subscriber A 18.5659 Contribution Margin ratio A/32.49 0.57 Less: Fixed cost Maintainence Physical Activities 110000 Annual fixed Fees 790000 Operating Cost 120000 Total Fixed Cost 1020000 Net Income/(loss) ($722,945.60) Ans 2 Breakeven= Fixed Cost/Contribution Margin per unit 54939 Brekeven sales in $ Fixed cost/Contribution margin Ratio 1784982 Ans 3 Sales=Fixed Cost+Target profit/Contribution margin ratio 1830482 Sales price 32.49 No. of subscribers 56340 Ans 4 Sales=Fixed Cost+Target profit/Contribution margin ratio 1854981 Target profit=$26000/.65 40000

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