Cablevision has been approached by the city of Mirada to run its cable operation
ID: 2421582 • 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: bullet It will offer Mirada residents a basic set of 25 cable television stations at a rate of dollar32.99 per month. bullet Cablevision will pay the city dollar2.50 per cable subscriber per month to maintain the physical facilities. bullet Cablevision will actually pay another company an annual fixed fee of dollar 700,000 plus dollar8.75 per cable subscriber per month to broadcast the 25 channels. CableVision estimates that operating that operating costs for billing, program news mailings, etc. will be dollar125,000 per month plus 8percentagee of monthly revenue. CableVision has several questions about is monthly revenues, costs, and profits in 2016.Explanation / Answer
Part A
1. monthly contibution margin per cable = sales - variable cost
=32.99 - (2.50 + 8.75 +[ 8% * 32.99]
= 32.99 - (2.50 + 8.75 + 2.6392)
=$19.10
Part B
4. Revenue to earn $24000 of profit = break even unit sale at desired profit * $32.99
=15044 * $32.99
=$496302