Reference no: EM132418501

Problem:

Break-even analysis for a service company.

Sprint Nextel is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 32.5 million direct subscribers (accounts) that generated revenue of $35,345 million. Costs and expenses for the year were as follows (in millions):

Cost of Revenue: $ 20,841.00

Selling, General, and Administrative expenses: $ 9,765.00

Depreciation: $ 2239.00

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).

Required:

1. What is Sprint Nextel's break-even number of accounts, using the data and assumptions given? Round units (accounts) and per-account amounts to one decimal place.
2. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constant?