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Discussion Forum - Unit 4

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The document discusses financial data for Public Broadcasting Service (PBS) and its subsidiaries. [1] PBS earns $250,000 in annual revenue from airtime sales with variable costs of $100,000 and fixed costs of $120,000, resulting in net profit of $30,000. [2] Sunk costs like building leases that cannot be recovered do not affect decision making. [3] Opportunity cost considers potential gains from alternative choices like PBS investing in educational streaming apps.

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Discussion Forum - Unit 4

Uploaded by

Eyad Abdullah
43 views4 pages
The document discusses financial data for Public Broadcasting Service (PBS) and its subsidiaries. [1] PBS earns $250,000 in annual revenue from airtime sales with variable costs of $100,000 and fixed costs of $120,000, resulting in net profit of $30,000. [2] Sunk costs like building leases that cannot be recovered do not affect decision making. [3] Opportunity cost considers potential gains from alternative choices like PBS investing in educational streaming apps.

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Discussion Forum – Unit 4

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The document discusses financial data for Public Broadcasting Service (PBS) and its subsidiaries. [1] PBS earns $250,000 in annual revenue from airtime sales with variable costs of $100,000 and fixed costs of $120,000, resulting in net profit of $30,000. [2] Sunk costs like building leases that cannot be recovered do not affect decision making. [3] Opportunity cost considers potential gains from alternative choices like PBS investing in educational streaming apps.

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43 views4 pages

Discussion Forum - Unit 4

Uploaded by

Eyad Abdullah
The document discusses financial data for Public Broadcasting Service (PBS) and its subsidiaries. [1] PBS earns $250,000 in annual revenue from airtime sales with variable costs of $100,000 and fixed costs of $120,000, resulting in net profit of $30,000. [2] Sunk costs like building leases that cannot be recovered do not affect decision making. [3] Opportunity cost considers potential gains from alternative choices like PBS investing in educational streaming apps.

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BUS 5110: Managerial Accounting – Discussion Forum Unit 4

Discussion Forum – Unit 4

Managerial Accounting

Public Broadcasting Service and Subsidiaries Financial Data

BUS 5110

Dr. Jamal Boubetanba

May 01, 2021


BUS 5110: Managerial Accounting – Discussion Forum Unit 4

Public Broadcasting Subsidiary (PBS) provides televised programming primarily

in the United States, and in the quest for comprehensive coverage, it has partnered with

numerous like providers to have redundancies that aid in reliability. PBS’s main source of

income is through the sale of airtime that accounted for $250,000 in sales bearing a total

variable cost of $100,000 and a fixed cost of $120,000. This translated to a net profit of

$30,000.

Revenue $250,000
Variable expenses $100,000
Contribution margin = Sales – Variable Costs = $150,000
Fixed expenses $120,000
Net Profit $30,000
CM % = (Sales - Variable expenses)/Sales
= (250000 – 100000)/ 250000 x 100
= 60%
PBS
Sales $250,000
Less variable Costs $100,000
Contribution Margin (CM) $150,000

According to Tuovila (2021), Sunk Cost refers to “money that has already been

spent and which cannot be recovered.” PBS for example spends $5,000 on building lease

per month and $1,500 on equipment rental – these costs are what is referred to as sunk

cost as they remain the same and do not affect decision making within the organization or

future costs.

PBS sells an hour of airtime for $250,000 while the segment costs them $100,000

to produce, a gross profit of $150,000. Furthermore, PBS can decide to sell prime-time

segments for a higher price to earn a greater profit percentage. Note that the

aforementioned sunk cost (building lease and equipment rental) has no bearing on the

decision-making process i.e. pricing.


BUS 5110: Managerial Accounting – Discussion Forum Unit 4

Opportunity cost is associated with the potential pecuniary loss or gain in making

a decision. For Example, PBS invested heavily in educational programs targeting

primarily adolescence. Holistically 45% of this target group surveys have shown to have

a smart device, as such, opted to download applications and stream. In addition, the

viewing of PBS educational content ranges from 60-95 minutes daily. This traffic

afforded PBS a sensible portion of this $120 billion dollar industry, which further

exposes the true nature of opportunity cost. It is a roll of the dice that is affected by many

forces such as the economy, policies, and demand (Kennon, 2020).

It is healthy for revenue streams to be viewed under differential cost to appreciate

the profit/loss or its potential trajectory. However, Sunk Costs are unchanging, and

opportunity cost is based on uncontrollable variables and vastly based on the alignment

of opportunity and means and will.


BUS 5110: Managerial Accounting – Discussion Forum Unit 4

References

Kennon, J. (2020, December 22). What Is Opportunity Cost? The Balance.

https://www.thebalance.com/what-is-opportunity-cost-357200.

Tuovila, A. (2021, February 25). Sunk Cost. Investopedia.

https://www.investopedia.com/terms/s/sunkcost.asp.

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