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 $29.99 per month.
• It will pay the city $105,000 per month plus $3.50 of the monthly cable subscriber rate per month to maintain the physical facilities.
• It will actually pay another company an annual fixed fee of $790,000 plus $7.50 per cable subscriber per month to broadcast the 25 channels.

CableVision estimates that operating costs for billing, program news mailings, etc. will be $125,000 per month plus 9% of the monthly subscriber rate. CableVision has several questions about its monthly revenues, costs, and profits in 2020.

the estimated monthy contribution margin per cable subscriber for CableVision in 2020?   $16.29

the estimated total monthly fixed costs for CableVision in 2020?   $295,833   These answers are both correct. I need help finding the bolded questions below, I'll post what I got but they are not correct. Everything needs to be rounded to the nearest whole number.

What is CableVision's estimated monthly operating income in 2020 if 17,000 residents subscribe? I got -18903, incorrect

How many monthly subscribers would be required for CableVision to break even in 2020? I got 18160, incorrect.

How many monthly subscribers would be required for CableVision to earn $24,000 per month in 2020? I got 19634, incorrect.

Assuming a tax rate of 34%, how many monthly subscribers would be required for CableVision to earn $24,000 per month in 2020? I got 22494, incorrect.

^^ Not sure how my answers are incorrect here but they are.

Some of CableVision's managers are uncertain about their estimate of monthly fixed operating costs. Assuming that 21,000 residents subscribe, how large can monthly fixed operating costs be for CableVision to still earn $24,000 per month in 2020 (ignore taxes)?

Answer 1

1. What is the estimated monthly contribution margin per cable subscriber for CableVision in 2019?
Contribution Margin = Selling Price - Variable Cost per unit
Contribution Margin = $29.99 - (3.50 + 7.50 + 9% x 29.99)	$16.29	per subscriber
2. What are the estimated total monthly fixed costs for CableVision in 2020?
Fixed cost = ($790000/12)+105000+125000)	$2,95,833
3. What is CableVision's estimated monthly operating income if 17,000 residents subscribe?
operating loss = Contribution margin - fixed cost = (16.29 x 17000) - 295833)	$-18,888
4. How many monthly subscribers would be required for CableVision to break even in 2020?
BEP (units) = Fixed Cost/Contribution Margin per unit	18,159	subscribers
5. How many monthly subscribers would be required for CableVision to earn $24,000 per month in 2020?
BEP (units) = Fixed Cost + TP/Contribution Margin per unit
BEP (units) = 295833 + 24000/16.29	19,633	subscribers
6. Assuming a tax rate of 34%, How many monthly subscribers would be required for CableVision to earn $24000 per month in 2020?
BEP (units) = Fixed Cost + TP + income Tax/Contribution Margin per unit
Income Tax = [$24,000 net income ÷ (1 – .34 tax rate)] – $24,000).	$12,363.64
BEP (units) = 295833 + 24000 + 12363.64/16.29	20,392	subscribers
Check:
	Total	Per Unit
Sales	6,11,543.08	$29.99
Less: Variable Expenses	2,79,346.11	$13.70
Contribution Margin	3,32,196.97	$16.29
Less: Fixed Expenses	2,95,833.33
Net Operating Profit	36,363.64
Less: tax @34%	12,363.64
Net Income	24,000.00
7. Some of CableVision's managers are uncertain about their estimate of monthly fixed operating costs. Assuming that 21,000 residents subscribe, how large can monthly fixed operating costs be for CableVision to still earn $24,000 per month in 2020 (ignore taxes)?
Operating FC = (295833/18159 x 21000 ) - 24000	3,18,108.90
Check
	Total	Per Unit
Sales	6,29,790.00	$29.99
Less: Variable Expenses	2,87,681.10	$13.70
Contribution Margin	3,42,108.90	$16.29
Less: Fixed Expenses = (295833/18159 x 21000 ) - 24000	3,18,108.90
Net Operating Profit	24,000.00