Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 27

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):

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 Newel'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