Salem Telephone

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Salem Telephone Company
1. With respect to the revenue hours the expenses, power and operations: hourly personnel are the variable expenses. Rent, custodial services, Computer leases, Maintenance, Depreciation, Salaried staff, administration, sales, sales promotions, corporate services and systems development and maintenance expenses can be treated as fixed costs.

2. Costs per revenue hours for the Variable expenses power and operations hourly personnel are as follows Expenses| Jan | Feb| March|
| | | |
Power| 4.699088| 4.699367| 4.700831|
Operations: hourly personnel| 24| 24| 24|
3. Create a contribution margin income statement for Salem Data Services. Assume that intra company usage is 205 hours. Assume commercial usage is at the March level. Contribution Margin Income Statement for Salem Data Services: Revenues

Intra-company 82,000
Commercial 110,400
Total Revenues 192,400
Variable expenses (power + hourly personnel) 9,844
Contribution margin 182,556
Fixed expenses
Rent 8,000
Custodial services 1,240
Computer leases 95,000
Maintenance 5,400
Depreciation 26,180
Salaried staff 21,600
System development 12,000
Administration 9,000
Sales 11,200
Sales promotion 8,083
Corporate services 15,236
Total fixed expenses 212,939
Net income -30,383
4. Assuming the intra-company demand for service will average 205 hours per month, what level of commercial revenue hours of computer use would be necessary to break even each month? Based on the assumptions, we can obtain the number of commercial revenue hours as follows: Revenue = Variable Costs + Fixed Costs

(205*400 + X *800) =28.78(205+X) + 212939
* X = 177.39 ~ 178(approx.)
Therefore, SDS needs to serve at least 178 commercial hours to break even each month. 5. Estimate the effect on income of each of...
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