Question

CableVision has been approached by the City of Mirada to run its cable operations in 2019. 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 $33.49 per month It will pay the city $110,000 per month plus $2.50 per cable subscriber per month to maintain the physical facilities It will actually pay another company an annual fixed fee of $700,000 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 $120,000 per month plus 9% 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 (8 tries; 8 points) 1. What 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 0/8 Part B (8 tries; 8 points) 1. What is CableVision's estimated monthly operating income in 2019 if 17,000 residents subscribe? 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 $30,000 per month in 2019? 4. Assuming a tax rate of 32%, how many monthly subscribers would be required for CableVision to earn $30,000 per month in 2019? 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 20,000 residents subscribe, how large can monthly fixed operating costs be for CableVision to still earn $30,000 per month in 2019 (ignore taxes)? Submit Answer Tries 0/4

Answer 1

Part A Monthlv contribution margin per cable subscriber for CableVision in 2019 Particular Sales(A Variable cost Physical facilities Broadcast fee Value $ 33.49 2.50 8.50 3.01 erating cost (3 3 .49*9% To 14.01 tal Variable cost Contribution margin A-B 19.48 Total monthly fixed cost for CableVision in 2019 Particular Monthly broadcast fee (700000/12 Monthly operating fee Maintenance cost of physical Amount $ 58,333 120,000 110,000 288,333 facilities Total monthly fixed cost

Part B 1. Monthlv operating income for CableVision in 2019 Particular Contribution per month Amount $ 331,160 288,333 42,827 17,000*19.48 Less: Monthly fixed cost Monthly operating income Break-even (in units) for CableVision in 2019 Total fixed cost Contribution per unit Break-even (in units)- 288,333 19.48 -14,801.49 Required sale for CableVision in 2019 when estimated profit is $30,000 Total fixed cost +Esiimatedprofit Contribution per unit 288,333+30,000 19.48 -$16,341.53

4 Required sale for CableVision in 2019 when estimated profit is $30,000 and tax rate is 32% Total fixed cost +Esitmatedprofit Required sale- Contribution perunit 288,333 +44,117.65 19.48 $17066.25 Calculation: Profit after tax- $30,000 Estimated profit- Profitaftertax (1-tax percentage) Contribution margin perunit _30,000 (1-.32) 19.48 30,000x.68 1948 44,117.65 Part C Fixed operating expense Particular Contribution (20,000 19.48 Less Estimated profit Amount $ 389,600 30,000 359,600 Fixed cost