Sprint Nextel is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 33.3 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 ..... 9,418
Depreciation .................. 5,074
Assume that 75% of the cost of revenue and 25% 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 (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?