Sprint Nextel Corporation is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 44.5 million direct subscribers (accounts) that generated revenue of $32,563 million. Costs and expenses for the year were as follows (in millions):
Cost of revenue ............. $17,492
Selling, general, and administrative expenses .. 9,438
Depreciation, amortization, and other expenses . 6,228

Assume that 75% of the cost of revenue and 35% 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 above? Round units to one decimal place (in millions).
b. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constant?

  • CreatedFebruary 04, 2014
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