Question

Need help ASAP please! Not exactly sure how to do the overall problem and approaching it.

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. 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 $31.99 per month. • It will pay the city $1,100,000 per year plus $3.00 of the monthly cable subscriber rate per month to maintain the physical facilities. . It will actually pay another company a monthly fixed fee of $55,000 plus $8.75 per cable subscriber per month to broadcast the 25 channels. CableVision estimates that operating costs for billing, program news mailings, etc. will be $120,000 per month plus 9% of the monthly subscriber rate. CableVision has several questions about its monthly revenues, costs, and profits in 2020. 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 (8 tries; 8 points) 1. What is the estimated monthy contribution margin per cable subscriber for CableVision in 2020? 2. What are the estimated total monthly fixed costs for CableVision in 2020? Submit Answer Tries 0/8 Part B (8 tries; 8 points) 1. What is CableVision's estimated monthly operating income in 2020 if 19,000 residents subscribe? 2. How many monthly subscribers would be required for CableVision to break even in 2020? 3. How many monthly subscribers would be required for CableVision to earn $25,000 per month in 2020? 4. Assuming a tax rate of 32%, how many monthly subscribers would be required for CableVision to earn $25,000 per month in 2020? Submit Answer Tries 0/8 Part C (4 tries; 4 points) Some of CableVision'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 $25,000 per month in 2020 (ignore taxes)? Submit Answer Tries 0/4

Answer 1

Part A
1. Estimated monthly contribution margin per cable subscriber = Selling price - Variable costs
= $31.99 - (3+8.75+31.99*9%) = $17.3609

2. Estimated monthly fixed costs = $55000+1100000/12+120000 = $266667

Part B
1. Monthly Operating Income for 19000 subscribers = 19000 x $17.3609 - $266667 = $63190

2. Break Even = Fixed Costs / Contribution margin per subscriber
= $266667 / 17.3609 = 15361

3. Target to earn $25000 = (Fixed Costs+Target Profit) / Contribution margin per subscriber
= ($266667+25000) / 17.3609 = 16801

4. Profit before tax = $25000/0.68 = $36765

Target to earn $25000 after tax = (Fixed Costs+Target Profit) / Contribution margin per subscriber
= ($266667+36765) / 17.3609 = 17478

Part C
Monthly Fixed Operating Costs = 22000 x $17.3609 - ($55000+1100000/12) - $25000 = $210273