Salem Telephone Company 1.Variable Cost: Power, Operations: hourly personnel. Fixed Cost: Space cost-rent, Custodial services, Computer leases, Maintenance, Computer equipment depreciation, Office equipment and fixtures depreciation, Operations: salaried staff, systems development and maintenance, Administration, sales, sales promotion, Corporate services. 2. Cost per revenue hour=Cost/revenue hour Power: January: 1546/329=4.6991 February:
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Managerial Accounting Salem Telephone Company Question 1 Fixed Expenses: * Rent * Custodial services * Computer leases * Maintenance * Computer equipment * Office equipment and fixtures * Salaried staff * Systems development and maintenance * Administration * Sales * Sales promotion * Corporate services * Variable Expenses: * Power * Hourly personnel Question 2 Question 3: Income Statement Date | March | Revenues |
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1. Revenue hours represent the key activity that drives costs at Salem Data Services. Which expenses in Exhibit 2 are variable with respect to revenue hours? Which expenses are fixed with respect to revenue hours? A) Variable with respect to revenue hours Hourly personnel Salaries expense Power Expense B) Fixed expenses with respect to revenue hours: Rent Custodial services Computer leases Maintenance Depreciation of computer equipment, office equipment and fixtures
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Salem telephone case 1. ”Revenue hours” represent the key activity that drives costs at Salem Data Service . Which expenses in Exhibit 2 are variable with respect to revenue hours? Which expenses are fixed with respect to revenue hours? A : Variable costs : The power, hourly personal. Fixed costs : The rent, custodial service, computer leases, maintenance, computer equipment, office equipment and fixtures, salaried staff, system development and maintenance, administration, sales
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Promotions | $7,909 | $7,039 | $8,083 | Cost/Revenue Hr. | $24.04/hr. | $22.28/hr. | $22.39/hr. | 3) Contribution margin income statement for Salem Data Services Assumption: Intra company usage=205 hours; Commercial usage for March=138 hours Revenue Hours Intra company: 205 Commercial: 138 Total Revenue Hours: 343 Salem Data Services Income Statement | | Revenues | | Intra company sales | $82,000 | Commercial Sales | 110,400 |
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Variable Cost per Hour Usage 8 Appendix E- Contribution Margin Income Statement, March 2004 9 Appendix F- Contribution Margin Ratios 11 Appendix G- Break-even Analysis 12 Appendix H- “What if” Analysis 13 Executive Summary Since 2001, Salem Data Services has been operating at a net loss. After review the reports from first quarter 2004, it has become apparent that action will be necessary. Through our examination of the first quarter 2004 reports, we have concluded three key areas
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Salem Telephone Case 1) In my opinion the expenses that are variable with respect to revenue hours at Salem Data Services are Power, Hourly personnel, and Sales promotion. I believe these expenses are variable because they change with revenue. Corporate services is a mixed cost and there is not enough information to ascertain the portion that is variable. The fixed expenses with respect to revenue include, Space costs, Equipment costs, depreciation expense, Salaried staff, system development
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Salem Telephone Company Case Study 1. Variable Expenses with respect to revenue hours: Power expense, hourly personnel salaries expense. Fixed expenses with respect to revenue hours: Rent, custodial services, computer leases, maintenance, depreciation of computer equipment and office equipment and fixtures, operations salaried staff, systems development and maintenance, administration, and sales, sales promotions, corporate services. 2. Units: dollars per hour January February March Power expense
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Salem Telephone Company Case Study 1. Variable Expenses with respect to revenue hours: Power expense, hourly personnel salaries expense. Fixed expenses with respect to revenue hours: Rent, custodial services, computer leases, maintenance, depreciation of computer equipment and office equipment and fixtures, operations salaried staff, systems development and maintenance, administration, and sales, sales promotions, corporate services. 2. Units: dollars per hour January February March Power
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Salem Data Services was established as computer data service firm. Flores initially believed that Salem Data Services would be profitable subsidiary for the parent company, Salem Telephone Company. Salem Data Services would perform data processing for Salem Telephone Company as well as sell computer services to other firms. Flores stood by the idea that the subsidiary would lower Salem Telephone Company’s need of increasing telephone rates. Salem Data Services struggled to become a profitable
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