Question

This problem contains three parts. In Part A, you are asked to determine the parameters of the profit function -the contribution margin and the fixed costs. You should not move on to Parts B and C until you get Part A correct, or until you use up all of your tries. The correct profit function parameters will be given to you after you have completed Part A-you should use these parameters in Parts B and C The problem is worth 20 points. Parts A and B are worth eight points each; Part C is worth four points. To get the eight points for Part A, you must answer both questions correctly; to get the eight points for Part B, you must answer all four questions correctly. You get eight tries on Part A, eight on Part B, and four on Part C. CableVision has been approached by the City of Mirada to run its cable operations in 2019. Arter negotiating with key parties, Cablevision has made the following agreements: It will offer Mirada residents basic set of 25 cable television tations at a rate of $30.49 per month. . It will pay the city $80,000 pe month plus $4.00 per cabla subscriber per month to maintain the physical faciities It will actually pay another company an annual fixed fee or $760,000 plus $8.75 per cable subscriber per month to broadcast the 25 channels Cablevision estimates that operating costs for billing, program news maings, etc. will be $125,000 per month plus 8% of monthly revenue. Cablevision has several questions about its monthly revenues, costs, and profits in 2019 REQUIRED [ROUND YOUR ANSWER TO PART A, QUESTION 1 TO THE NEAREST CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST DOLLAR.] Part A (B tries8 points) 1. Whet is the estimated monthy contribution margin per cable subscriber for CableVision in 2019? 2. What are the estimated total monthly fixed costs for Cablevision in 2019? Submit Answer Tries 0r8 Part B (8 trics: 8 points) 1. Whot is CableVisions cstimated monthly operating income in 2019 if 19,000 residents subacribe? 2. How many monthly subscribers would be required for Cablevision to break even in 2019? 3. How many monthly subscribers would be required for Cablevision to earn $29,000 per month in 2019? 4. Assuming a tax rate or 34%, how many monthly subscribers would be required for Cablevision to earn $29,000 per month in 2019? Submit Answer Tries 0g Some of Cablevision's managers are uncertain about their estimate of monthly fixed oparating costs, Assuming that 21,000 residents subscribe, how large can monthily fixed operating costs be for CableVision to still earn $29,000 per month in 2019 ignore taxes)? Submt Ansver Tries 0/4

Answer 1

Ans B 2 17537 monthly subscriber will be required for Cablevision to be break even Break Even Sales: It is the volume of sales at which the total cost is equal to total revenue Break Even Sales in units- Fixed Expense/Contribution margin per unit Fixed Expense Contribution Margin per subscriber Bre $268,333 $15.30 17,537 ak Even sales (subscriber) [$268333/$15.301 Ans B 3 19433 monthly subscriber will be required for Cablevision to earn income of $29000 $268,333 $29,000 $297,333 $15.30 19,433 Fixed Expense Add: Operating income Total Contribution Margin per subscriber Subscriber to earn $29000 income [$297333/$15.30] Ans B 4 22304 monthly subscriber will be required for Cablevision to earn income of $29000 after tax @ 34% Fixed Expense Add: Operating income after tax Add: Tax on operating income [$29000/(100%-34%] Total $268,333 $29,000 $43,939 $341,272 Contribution Margin per subscriber Subscriber to earn $29000 income [$341272/ $15.30] $15.30 22,304