Break-Even Analysis ;

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 Selling, general, and administrative expenses 9,765 Depreciation 2,239 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). a). 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.

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

Answer should be in the excel example below.

Break-Even (in accounts) = Total Fixed Costs
Revenue per Account - Variable Cost per Account
=
-
=

= million (rounded) accounts
Supporting calculations:
Revenue per account (in millions):
Total revenue (in millions)
Total accounts (in millions) ¸
Revenue per account (in millions)
Variable cost per account (in millions): Variable
Full Amount ´ Percentage
Cost of revenue (in millions)
Selling, gen., admin. exp. (in millions)
Total variable costs
Divided by number of accounts ¸
Variable cost per account (in millions)
Total fixed costs (in millions): Fixed
Full Amount ´ Percentage
Cost of revenue (in millions) $ 20,841
Selling, gen., admin. exp. (in millions) 9,765
Depreciation
Total fixed costs (in millions)
Break-even (in $ revenue, in millions):
Total costs
Divided by number of accounts ¸ 32.5
Break-even $ 941.7 * million