CableVision has been approached by the City of Mirada to run its cable operation
ID: 2419757 • Letter: C
Question
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 $29.99 per month. CableVision will pay the city $100,000 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 $820,000 plus $7.75 per cable subscriber per month to broadcast the 25 channels.
CableVision estimates that operating costs for billing, program news mailings, etc. will be $125,000 per month plus 9% of monthly revenue. CableVision has several questions about its monthly revenues, costs, and profits in 2016.
REQUIRED [ROUND YOUR ANSWER TO PART A, QUESTION 1 TO THE NEAREST CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST DOLLAR.] Part A (6 tries; 8 points)
1. What is the estimated monthly contribution margin per cable subscriber for CableVision in 2016? 16.04 #1 IS CORRECT
2. What are the estimated total monthly fixed costs for CableVision in 2016?
Explanation / Answer
Statement Showing Contribution Margin per Cable Subscriber of Cable Vision in 2016
Sales Revenue Per Unit
$29.99
Variable Expenses
$3.5
$7.5
$2.70
$13.95
Contribution Margin
$16.04
Statement Showing Total Monthly Fixed Cost of Cable Vision in 2016
Charges to maintain Physical Facilities
$100000
Charges for Broadcasting 25 Channels to Subscriber ($820000/12)
$68333.33
Operating Costs for billing, Program news mailing etc
$125000
Total Fixed Cost
$293333.33
Statement Showing Contribution Margin per Cable Subscriber of Cable Vision in 2016
Sales Revenue Per Unit
$29.99
Variable Expenses
- Maintenance Charges
$3.5
- Broadcasting Charges for 25 Channel
$7.5
- Operating Costs @9% on Revenue
$2.70
$13.95
Contribution Margin
$16.04