The City of Mirada wants to offer cable television to its residents in 2013. The city has approached a company called CableVision to run its cable operations. After negotiating with key parties, CableVision has made the following agreements:
- Mirada will offer its residents a basic set of 25 cable television stations at a rate of $33.99 per month (all of the revenue will go to CableVision).
- The City of Mirada will maintain the physical facilities, and CableVision will pay the city $1,400,000 per year plus $4.00 per cable subscriber per month.
- CableVision will actually pay another company to broadcast the 25 channels and will pay this company a monthly fixed fee of $55,000 plus a monthly amount of $9.00 per cable subscriber per month.
CableVision will incur additional operating costs for billing, program news mailings, etc. These costs will include a fixed component of $120,000 per month, and a variable component of 7.0% of monthly revenue. CableVision has several questions about its monthly revenues, costs, and profits in 2013. REQUIRED [ROUND YOUR ANSWER TO PART A, QUESTION 1 TO THE NEAREST CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST DOLLAR.]
1. What is the estimated monthly contribution margin per cable subscriber for CableVision in 2013? [removed]
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2. What are the estimated total monthly fixed costs for CableVision in 2013? [removed]
3. What is CableVision’s estimated monthly operating income if 20,000 residents subscribe? [removed]
4. How many monthly subscribers would be required for CableVision to break even in 2013? [removed]
5. How many monthly subscribers would be required for CableVision to earn $20,000 per month in 2013? [removed]
6. Assuming a tax rate of 32%, what must revenue be in order for CableVision to earn $20,000 per month in 2013? [removed]
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