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December 19, 2014

Homework Help: Accounting

Posted by Samone on Sunday, February 22, 2009 at 7:19pm.

The City of Mirada wants to offer cable television to its residents in 2009. 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 $32.49 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 $3.75 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 $60,000 plus a monthly amount of $8.25 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 2009.

REQUIRED [ROUND YOUR ANSWERS TO PART A, QUESTION 1 AND PART C, QUESTION 8 TO THE NEAREST CENT; ROUND ALL OTHER INTERMEDIATE COMPUTATIONS TO THE NEAREST UNIT OR NEAREST DOLLAR.]

Part A (6 tries; 7 points)
1. What is the estimated monthly contribution margin per cable subscriber for CableVision in 2009?



2. What are the estimated total monthly fixed costs for CableVision in 2009?

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