Answer:
Total fixed costs = $3,00,00,00,000
Break-even number of subscribers = 37,500,000 Subscribers
Break-even number of subscribers will increase to 45,000,000
Explanation:
given data
Price per subscriber = $120 per year
Bandwidth cost per subscriber = $15 Per year
Operating cost per subscriber = $25 Per Year
Server lease costs per year = $10,00,00,000
Content costs per year = $2,00,00,00,000
Operating costs per year = $90,00,00,000
solution
we get here Total variable costs that is
Total variable costs = $15 + $25
Total variable costs = $40 per year
and here Contribution margin per subscriber per year will be
Contribution margin per subscriber per year = Price Per Subscriber - Variable Cost Per Subscriber .................1
Contribution margin per subscriber per year = $120 - $40
Contribution margin per subscriber per year = $80
and
now we get here Break-even number of subscribers that is express as
Break-even number of subscribers = total fixed cost ÷ contribution margin per subscriber .............................2
so here Total fixed costs will be
Total fixed costs = $10,00,00,000 + $2,00,00,00,000 + $90,00,00,000
Total fixed costs = $3,00,00,00,000
so here put value in equation 2 we get
Break-even number of subscribers = $3,000,000,000 ÷ $80
Break-even number of subscribers = 37,500,000 Subscribers
and
Number of subscribers to break-even will be
Number of subscribers to break-even = $3,600,000,000 ÷ $80
Number of subscribers to break-even = 45,000,000
Break-even number of subscribers will increase to 45,000,000
