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m Cengage Lea Google Chrome gnment/takeAssignmentMain.do?invoker- assignments&takeAssignmentsessionLocator-assignment-take;&inprogress; false eBook Calculator Print item Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 million direct subscribers (accounts) that generated revenue of $58,400 million, Costs and expenses for the year were as follows: Cost of revenue Selling, general, and administrative expenses Depreciation 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 Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number. $25,700 16,400 6,400 million accounts b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar. million per account

Explanation / Answer

Variable cost = (25700*70%+16400*30%) = 22910

Fixed cost = (25700*30%+16400*70%+6400) = 25590

Variable cost per subscribers = 22910/100 = 229.10

Revenue per account = 58400/100 = 584

a) Break even point = 25590/(584-229.10) = 72 million accounts

b) Revenue = 100 = 25590/(X-229.10) = 485 million per account

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