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Determine the number of new customer accounts needed

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Case Study: Media outlets often have websites that provide in-depth coverage of news and events. Portions of these websites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary.

These websites typically offer a free trial period to introduce viewers to the website. Assume that during a recent fiscal year, one outlet spent $3,073,770 on a promotional campaign for its website that offered two free months of service for new subscribers. In addition, assume the following information:

Number of months an average new customer stays with the service
(including the two free months)
25 months
Revenue per month per customer subscription $19
Variable cost per month per customer subscription $6

Question: Determine the number of new customer accounts needed to break even on the cost of the promotional campaign. In forming your answer,  treat the cost of the promotional campaign as a fixed cost and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin.

 

Reference no: EM133526504

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