Salem Telephone

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