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Sprint Nextel is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 36.7 million direct subscribers (accounts) that generated revenue of $35,635 million. Costs and expenses for the year were as follows (in millions):

Cost Of Revenue $16,746
Selling, General, and Administrative Expenses $11,355
Depreciation $5,953

Assume that 80% of the cost of revenue and 30% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations to one decimal place. Then, round all final answers as indicated below. Enter your answer in millions of dollars.

a. What is Sprint Nextel's break-even number of accounts, using the data and assumptions above?
___________ million accounts (rounded 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? Round to the nearest million.
___________ $ million per account

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9976014

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