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

The fixed operating costs can be $17833 to earn $26000 profit per month.

Revenue per subscriber ($) 32.49 Variable cost For maintaining physical facilities 3.5 for broadcasting the channels 7.5 9% of the revenue (0.09 x $32.49) 2.9241 Total variable cost per subscriber ($) 13.924 Contribution per subscriber($) 18.566 Number of estimated subscriber 21000 Total estimated monthly contribution $) 389884 Estimated profit per month ($) 26000 363884 Less: Monthly fixed costs Payment to the city 110000 Payment to cable company ($790000/12) 65833 Maximum monthly fixed operating cost($) 175833

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