Salem Telephone Company Case Analysis

Topics: Variable cost, Management accounting, Costs Pages: 4 (454 words) Published: October 8, 2014
1.)
VARIABLE EXPENSES
-Power
-Operations (hourly personnel)
FIXED EXPENSES
-Rent
-Custodial services
-Computer leases
-Maintenance
-Depreciation
-Operations (salaried staff)
-Systems development and maintenance
-Administration
-Sales
-Sales promotion
-Corporate services
2.)
VARIABLE EXPENSES: COST/HOUR
JAN.FEB.MAR.
Power:4.74.74.7
Operations (hourly personnel):242424
TOTAL:28.728.728.7
3.)
CONTRIBUTION MARGIN INCOME STATEMENT
SALES/REVENUE
Intracompany:205 hrs * $400/hr = $82,000
Commercial:138 hrs * $800/hr = $110,400
Total:343 hrs$192,400
VARIABLE EXPENSES
Power:$4.7/hr * 343 hrs = $1,612.10
Operations (hourly personnel):$24/hr * 343 hrs = $8,232.00
Total:$9,844.10

FIXED EXPENSES
-Rent$8,000
-Custodial services$1,240
-Computer leases$95,000
-Maintenance$5,400
-Depreciation$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
TOTAL:$212,939

Sales$192,400
Variable Expenses($9,844.10)
Contribution Margin$182,555.90
Fixed Expenses($212,939)
Net Profit/Loss($30,383.10)
4.)
BREAK-EVEN
Intracompany (revenue): 205 hrs * $400/hr =$82,000
-Variable Expenses: 205 hrs * 28.7/hr = $5,883.50
-Contribution Margin:$76,116.50

Total Fixed Cost:$212,939
Contribution Margin:($76,116.50)
“Remaining”:$136,822.50

136,822.50 / (800 – 28.7) = 177 units (Break-Even)

5.)
A) Commercial = $1,000/hr , 30% demand decrease

Intracompany:223 hrs * $400/hr = $89,200
Commercial:97 hrs * $1,000/hr = $97,000
Total:320 hrs$186,200
Variable Exp:320 hrs * 28.7/hr = $9,184

Sales$186,200
Variable Expenses($9,184)
Contribution Margin$177,016
Fixed Expenses...
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