Question:
Break-Even Analysis
Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $37,100. Costs and expenses for the year were as follows:
|
Cost of revenue
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$15,200
|
|
Selling, general, and administrative expenses
|
11,900
|
|
Depreciation
|
4,100
|
Assume that 75% of the cost of revenue and 25% 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.
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.