The Prestige Telephone Company

Topics: Revenue, Income statement, Income Pages: 2 (441 words) Published: November 18, 2012
The Prestige Telephone Company

2- Assume that the total expenses are around the average of $ 231,000. (By observing first three months’ results) If the total expenses are $ 231,000 than the total revenue should be $ 231,000 at the Break-Even Point. On the other hand if the company demand for service will be 205 hours , which means company sales revenue will be $ 82,000 (as the Public Service Commission’s restrictions says), and the other revenues in the commercial sales assume that around $ 10,000. So the revenue from the computer use should be ;

231,000 – 92,000 (82,000 + 10,000) = $ 139,000

The computer use were billed at $ 800, than the level of computer use in hourly;
139,000 / 800 = 173,75 ≈ 174 hours
3- a) Assume that the average commercial customers demand is 131 hours ((123 + 135 + 138) / 3) for the current situation and the total revenue is;
(131 h x $ 800) + (205 h x $ 400) + $ 10,000 = 196,800 (205 h for company demand and $ 10,000 for other revenues from commercial sales) If we assume that the total expenses are around the average of $ 231,000, than the net income is;

$ 196,800 - $ 231,000 = ($ 34,200)
For the new situation, the commercial use demand is;
131 h % 70 = 91,7 ≈ 92 h
So the total revenue is;
(92 h x $ 1,000) + (205 h x $ 400) + $ 10,000 = $ 184,000 (205 h for company demand and $ 10,000 for other revenues from commercial sales) If we assume that the total expenses are around the average of $ 231,000, than the net income is;

$ 184,000 - $ 231,000 = ($ 47,000)
In the result increasing the price for commercial customers $ 1,000 which means the commercial demands will reduce by % 30, the net income will reduce by % 27,23. b) As the previous question, if we assume the same amount of commercial sales for current situation, the net income is $ 34,200. (205 h for company demand and $ 10,000 for other revenues from commercial sales) For the new situation the commercial use...
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