Improve service and meet the growing demand

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Reference no: EM132270636

Suppose AT & T is considering the addition of another tower in one of the fast growing cities to improve service and meet the growing demand. The primary location being considered will have a fixed cost of $10,000 per month and variable cost of $25 per customer served. Each customer is charged $50 on average in the area. Required:

a. What volume (number of customers) per month is required in order to break even?

b. What profit would be realized on a monthly volume of 400 customers?

c. What volume is needed to obtain a profit of $20,000 per month?

d. What volume is needed to provide a monthly revenue of $120,000?

e. What should the price be if AT&T wants to make a monthly profit of $10,000 and they have 1,000 customers?

f. Plot the total cost and total revenue lines.

HINT: Use the break-even point and two other points, one above and one below BEP.

Then compute the total variable cost, fixed cost and total revenue corresponding to the three points selected to draw a graph. You may select more than three points, of course.

Reference no: EM132270636

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