Salem Telephone Company
Essay by Yuvika Jain • October 4, 2018 • Case Study • 526 Words (3 Pages) • 865 Views
Salem Telephone Company
QUESTION 1:
In terms of units, fixed cost per unit decreases as the activity increases while variable cost per unit remains constant regardless of change in activity.
The expenses associated with fixed and variable costs with respect to hours as showcased in Exhibit 2 are as follows:
Fixed Costs | Variable Costs |
|
|
______________________________________________________________________________
QUESTION 2:
With respect to revenue hours, the variable costs per revenue hours:
Total Revenue Hours | Variable Costs | Variable costs/ revenue hours | |
January | 329 | Power: $1,546 Operations(hourly personnel): $7,896 | Power: $1,546/ 329 = $4.70 Operations(hourly personnel): $7,896/ 329 = $24 |
February | 316 | Power: $1,485 Operations(hourly personnel): $7,584 | Power: $1,485/ 316 = $4.70 Operations(hourly personnel): $7,584/ 316 = $24 |
March | 361 | Power: $1,697 Operations(hourly personnel): $8,664 | Power: $1,697/ 361 = $4.70 Operations(hourly personnel): $8,664/ 361 = $24 |
Thus, reaffirming the fact that variable costs per unit remain constant regardless of change in activity.
_____________________________________________________________________________
QUESTION 3:
If Intracompany work is billed at $400/ hr and commercial sales at $800/hr:
Rate | Hours | Total | |
Intracompany | $400 | 223 | $400* 223 = $89,200 |
Commercial | $800 | 138 | $800* 138 = $110,400 |
$199,600 |
Total Revenue equals $199,600.
With a $4.70/ unit for Power and $24/ unit for Operations (hourly personnel), total variable expenses:
Cost/ unit | Hours | Total | |
Power | $4.70 | 223+138 = 361 | $4.70* 361 = $1,697 |
Operations (hourly personnel) | $24 | 223+138 = 361 | $24* 361 = $8,664 |
$10,361 |
Total Variable Costs equal $10,361.
Total Fixed Cost:
Rent | $8,000 |
Custodial Services | $1,240 |
Computer Leases | $95,000 |
Maintenance | $5,400 |
Depreciation (Computer Equipment + Office equipment and fixtures) | $25,500+$680 = $26,180 |
Operations: salaried staff | $21,600 |
Systems Development and maintenance | $12,000 |
Administration | $9,000 |
Sales | $11,200 |
Sales Promotion | $8,083 |
Corporate services | $15,236 |
$212,939 |
INCOME STATEMENT
SALEM TELEPHONE COMPANY INCOME STATEMENT MARCH 2004 | |
Sales Revenue | $199,600 |
Variable Cost | $10,361 |
Contribution Margin | $189,239 |
Fixed Cost | $212,939 |
Net Loss | ($23,700) |
...
...
(2018, 10). Salem Telephone Company. AllBestEssays.com. Retrieved 10, 2018, from https://www.allbestessays.com/essay/Salem-Telephone-Company/70694.html
"Salem Telephone Company" AllBestEssays.com. 10 2018. 2018. 10 2018 <https://www.allbestessays.com/essay/Salem-Telephone-Company/70694.html>.
"Salem Telephone Company." AllBestEssays.com. AllBestEssays.com, 10 2018. Web. 10 2018. <https://www.allbestessays.com/essay/Salem-Telephone-Company/70694.html>.
"Salem Telephone Company." AllBestEssays.com. 10, 2018. Accessed 10, 2018. https://www.allbestessays.com/essay/Salem-Telephone-Company/70694.html.