Break-Even Analysis Rotelco is one of the largest digital wireless service provi

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 $52,900. Costs and expenses for the year were as follows:

Assume that 70% of the cost of revenue and 20% 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.
$ per account

Cost of revenue $23,800 Selling, general, and administrative expenses 15,300 Depreciation 5,800

Explanation / Answer

Calculate variable and fixed cost :

a. What is Rotelco's break-even number of accounts, using the data and assumptions above

Break even point (accounts) = 25180/(529-197.20) = 76 accounts

b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant

100 = 25180/(X-197.20)

100X-19720 = 25180

X = 449 per account

So answer is $449

Variable cost Fixed cost Cost of revenue 16660 7140 Selling, general, and administrative expenses 3060 12240 Depreciation 5800 Total 19720 25180

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