Break-Even Analysis
Media outlets often have websites that provide in-depth coverageof news and events. Portions of these websites are restricted tomembers who pay a monthly subscription to gain access to exclusivenews and commentary.
These websites typically offer a free trial period to introduceviewers to the website. Assume that during a recent fiscal year,one outlet spent $3,310,560 on a promotional campaign for itswebsite that offered two free months of service for newsubscribers. In addition, assume the following information:
Number of months an average newcustomer stays with the service
(including the two free months)
21 months Revenue per month per customersubscription $33 Variable cost per month percustomer subscription $11
Determine the number of new customer accounts needed to breakeven on the cost of the promotional campaign. In forming youranswer, (1) treat the cost of the promotional campaign as a fixedcost, and (2) treat the revenue less variable cost per account forthe subscription period as the unit contribution margin.
accounts
Break-Even Analysis
Media outlets often have websites that provide in-depth coverageof news and events. Portions of these websites are restricted tomembers who pay a monthly subscription to gain access to exclusivenews and commentary.
These websites typically offer a free trial period to introduceviewers to the website. Assume that during a recent fiscal year,one outlet spent $3,310,560 on a promotional campaign for itswebsite that offered two free months of service for newsubscribers. In addition, assume the following information:
| Number of months an average newcustomer stays with the service (including the two free months) | 21 months |
| Revenue per month per customersubscription | $33 |
| Variable cost per month percustomer subscription | $11 |
Determine the number of new customer accounts needed to breakeven on the cost of the promotional campaign. In forming youranswer, (1) treat the cost of the promotional campaign as a fixedcost, and (2) treat the revenue less variable cost per account forthe subscription period as the unit contribution margin.
accounts
