Question

Time Notes Evaluate de Info This problem contains three parts. In Part A. you are asked to determine the parameters of the pront function - the contribution margin and the feed costs. You should not move on to Parts and Cuntil you get Part A correct, or until you use up all of your tries. The correct prent 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 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 , you must answer all four questions correctly. You get eight tres on Part A, eight on Part 1, and four on Part C. ablevision has been approached by the City of Mirada to run it cable operations in 2020 Aer negotiating with key parties, Cablevision has made the following greements: • It will offer Mirada residents a basic set of 25 cable television stations are of $33.48 per month • It will pay the dty $1,100,000 per year plus 14.00 of the monthly barber rate per month to maintain the physical facilities • It will actually pay another company a monthly wed fee of $70,000 plus $8.50 per cable subscriber per month to broadcast the 25 channels Cablevision estimates that operating costs for in program news man will be $130,000 per month plus of the monthly subscriber rote Cable Vision has several questions about the revenues, costs, and profits in 2020 REQUIRED ROUND YOUR ANSWER TO PART A QUESTION TO THE NEAREST CENT: ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST DOLLAR) Part A (tres points) 1. What is the estimated mothy contribution margin per cable subscriber for Cable Vision in 20207 $17.98 2. What are the estimated to the cost for CableVision in 20207 $291,667 You are correct Your awers are correct, but just to make sure that there are moroug es, we $17.98 for Part tres points) 1. Wat is Cables e t money operating come in 2020 16,000 residents w ribe! 2. How many month w h ers would be required for Cablevision to break even in 2020 3. How many monthly men would be required for Cable to cam $25.000 per month in 2020 4. A ng tax of 31 how many motyweribers would be required for Cabelon tocar 125,000 per month in 2007 100

Answer 1

1.Monthy contribution margin per subscriber = Revenue per subscriber – variable costs per subscriber

= 33.49-4-8.50-9%*33.49

= $17.9759

i.e. $17.98

2.Estimated monthly fixed costs = 70,000+1,100,000/12 + 130,000

= $291,667

1.Operating income = Contribution margin – fixed costs

= 16000*17.98 – 291,667

= -$3987

i.e. -$3987

2.Break even subscribers = Fixed costs/Contribution margin per subscriber

= 291,667/17.98

= 16,221.75 subscribers

i.e. 16,222 subscribers

3.Required = (25000+291,667)/17.98

= 17,612 subscribers

4.Required = (25000/0.69 + 291,667)/17.98

= 18,237 subscribers

1.Required contribution margin = 25000+291,667 = $316,667

Other fixed costs = 70000 + 1,100,000/12 = $161,667

Maximum monthly operating fixed costs = $155,000