Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Chapter 21, Problem 21.15EX
To determine
Break-even Analysis: It refers to an analysis of the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:
To compute: the number of new customer accounts needed to break even on the cost of the promotional campaign.
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Break-Even Analysis
Media outlets such as ESPN and Fox Sports often have websites that provide in-depth coverage of news and events. Portions of these websites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary.
These websites typically offer a free trial period to introduce viewers to the site. Assume that during a recent fiscal year, ESPN.com spent $4,200,000 on a promotional campaign for the ESPN.com website that offered two free months of service for new subscribers. In addition, assume the following information:
Number of months an average new customer stays with the service(including the two free months)
14 months
Revenue per month per customer subscription
$10.00
Variable cost per month per customer subscription
$5.00
Determine the number of new customer accounts needed to break even on the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a fixed cost, and…
Media outlets such as ESPN and Fox Sports often have websites
that provide in-depth coverage of news and events. Portions of these
websites are restricted to members who pay a monthly subscription
to gain access to exclusive news and commentary. These websites
typically offer a free trial period to introduce viewers to the site.
Assume that during a recent fiscal year, ESPN.com spent $4,200,000
on a promotional campaign for the ESPN.com website that offered
two free months of service for new subscribers. In addition, assume
the following information:
Number of months an average new customer stays with the service
(including the two free months)
14 months
Revenue per month per customer subscription
Variable cost per month per customer subscription
$10.00
$5.00
Determine the number of new customer accounts needed to break
even on the cost of the promotional campaign. In forming your
answer, (1) treat the cost of the promotional campaign as a fixed cost
and (2) treat the revenue less…
Break-even analysisMedia outlets such as ESPN and Fox Sports often have websites thatprovide in-depth coverage of news and events. Portions of thesewebsites are restricted to members who pay a monthly subscription to
gain access to exclusive news and commentary. These websites typicallyoffer a free trial period to introduce viewers to the site. Assume thatduring a recent fiscal year, ESPN.com spent $4,200,000 on a promotionalcampaign for the ESPN .com website that offered two free months ofservice for new subscribers. In addition, assume the following Information:
Number of months an average new customer stays with the service (including the two free months)
14 months
Revenue per month per customer subscription
$10.00
Variable cost per month per customer subscription
$5.00
Determine the number of new customer accounts needed to break evenon the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a fixed cost and (2)…
Chapter 21 Solutions
Accounting
Ch. 21 - Describe how total variable costs and unit...Ch. 21 - How would the following costs be classified...Ch. 21 - Describe how total fixed costs and unit fixed...Ch. 21 - In applying the high-low method of cost estimation...Ch. 21 - If fixed costs Increase, what would be the impact...Ch. 21 - An examination of the accounting records of...Ch. 21 - Prob. 7DQCh. 21 - Both Austin Company and Hill Company had the same...Ch. 21 - How does the sales mix affect the calculation of...Ch. 21 - What does operating leverage measure, and how is...
Ch. 21 - High-low method The manufacturing costs of...Ch. 21 - High-low method The manufacturing costs of...Ch. 21 - Contribution margin Lanning Company sells 160,000...Ch. 21 - Contribution margin Weidner Company sells 22,000...Ch. 21 - Prob. 21.3APECh. 21 - Prob. 21.3BPECh. 21 - Prob. 21.4APECh. 21 - Prob. 21.4BPECh. 21 - Prob. 21.5APECh. 21 - Prob. 21.5BPECh. 21 - Operating leverage SungSam Enterprises reports the...Ch. 21 - Prob. 21.6BPECh. 21 - Margin of safety Liu Inc. has sales of 48,500,000,...Ch. 21 - Margin of safety Junck Company has sales of...Ch. 21 - Classify costs Following is a list of various...Ch. 21 - Identify cost graphs The following cost graphs...Ch. 21 - Prob. 21.3EXCh. 21 - Identify activity bases From the following list of...Ch. 21 - Identify fixed and variable costs Intuit Inc...Ch. 21 - Relevant range and fixed and variable costs Vogel...Ch. 21 - High-low method Ziegler Inc. has decided to use...Ch. 21 - High-low method for a service company Boston...Ch. 21 - Contribution margin ratio a. Yountz Company...Ch. 21 - Contribution margin and contribution margin ratio...Ch. 21 - Prob. 21.11EXCh. 21 - Break-even sales Anheuser-Busch InBev Companies,...Ch. 21 - Break even sales Currently, the unit .selling...Ch. 21 - Prob. 21.14EXCh. 21 - Prob. 21.15EXCh. 21 - Prob. 21.16EXCh. 21 - Prob. 21.17EXCh. 21 - Prob. 21.18EXCh. 21 - Prob. 21.19EXCh. 21 - Prob. 21.20EXCh. 21 - Prob. 21.21EXCh. 21 - Break-even sales and sales mix for a service...Ch. 21 - Margin of safety a. If Canace Company, with a...Ch. 21 - Prob. 21.24EXCh. 21 - Operating leverage Beck Inc. and Bryant Inc. have...Ch. 21 - Items on variable costing income statement In the...Ch. 21 - Variable costing income statement On July 31, the...Ch. 21 - Appendix Absorption costing income statement On...Ch. 21 - Classify costs Seymour Clothing Co. manufactures a...Ch. 21 - Prob. 21.2APRCh. 21 - Prob. 21.3APRCh. 21 - Prob. 21.4APRCh. 21 - Sales mix and break-even sales Data related to the...Ch. 21 - Contribution margin, break-even sales,...Ch. 21 - Classify costs Cromwell Furniture Company...Ch. 21 - Prob. 21.2BPRCh. 21 - Break-even sales and cost-volume-profit chart For...Ch. 21 - Prob. 21.4BPRCh. 21 - Prob. 21.5BPRCh. 21 - Contribution margin, break-even sales,...Ch. 21 - Prob. 21.1CPCh. 21 - Communication Sun Airlines is a commercial airline...Ch. 21 - Break-even analysis Somerset Inc. has finished a...Ch. 21 - Variable costs and activity bases in decision...Ch. 21 - Variable costs and activity bases in decision...
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