Question

ableVision has been approached by the City of Mirada to run its cable operations in 2020. After negotiating with key parties, CableVision has made the following agreements: . It will offer Mirada residents a basic set of 25 cable television stations at a rate of $33.99 per month. • It will pay the city $80,000 per month plus $3.75 of the monthly cable subscriber rate per month to maintain the physical facilities. • It will actually pay another company an annual fixed fee of $760,000 plus $8.50 per cable subscriber per month to broadcast the 25 channels. CableVision estimates that operating costs for billing, program news mailings, etc. will be $110,000 per month plus 8% of the monthly subscriber rate. CableVision has several questions about its monthly revenues, costs, and profits in 2020. Your answers are correct, but just to make sure that there are no rounding issues, use $19.02 for the estimated contribution margin per subscriber and $253,333 for the estimated monthly fixed costs In Parts B and C. Part B (8 tries; 8 points) 1. What is CableVision's estimated monthly operating income in 2020 if 20,000 residents subscribe? $127,067 2. How many monthly subscribers would be required for Cablevision to break even in 2020? 13,319 3. How many monthly subscribers would be required for Cablevision to earn $20,000 per month in 2020? 14,371 4. Assuming a tax rate of 33%, how many monthly subscribers would be required for CableVision to earn $20,000 per month in 2020? 14,889 You are correct. Your receipt no. is 156-1727 Previous Tries Part C (4 tries; 4 points) Some of Cable Vision's managers are uncertain about their estimate of monthly fixed operating costs. Assuming that 22,000 residents subscribe, how large can monthly fixed operating costs be for CableVision to still earn $20,000 per month in 2020 (ignore taxes)?

Answer 1

Part C
Monthly Fixed Operating Expenses = 22000 x $19.02 - (80000+760000/12) - 20000 = $255107 or $255106