Organization Management

In: Business and Management

Submitted By mama259
Words 372
Pages 2
Question 3

The following income statement is for Salem Data Service, with the assumption that intra-company usage is 205 hours and commercial usage is at the March Level.
Income statement for Salem Data Services
Revenues:
Intra-company sales $82,000 Commercial sales 110,400
Total revenues 192400
Variable expenses (power +hourly personnel) 9,844
Contribution margin 182,556
Fixed expenses: Rent $8,000 Custodial services 1,240 Maintenance 5,400 Computer leases 95,000 Depreciation 26,180 Salaried staff 21,600 System development & maintenance 12,000 Administration 9,000 Sales 11,200 Sales promotion 8,083 Corporate services 15,236
Total fixed expenses 212,939
Net income loss $(30,383)

Question 4

In order to calculate the break even for each month, the unit variable cost per revenue hours must be calculated first by using figures from exhibit 1 & 2.

January February March
Variable cost: Power 1,546 1,485 1,697 Hourly personnel 7,896 7,584 8,664
Total variable cost 9,442 7,584 10,361
Total revenue hours 329 316 361
Variable costs per revenue hour $28.70 $28.70 $28.70

The Public Service Commission restricted Salem Telephone to $82,000 per month. Commercial sales were billed at $800 per hour. The intra company demand for service will average 205 hour per month.

Hence we can calculate the Contribution margin as follows: Revenue-Variable cost

The Variable cost of power is equal to $4.70 multiply by 205 hours which is equal to $964. The Variable cost of hourly personnel is equal to $24 multiply by205 hours which is equal to $4,920. Hence, the total variable cost is equal to $5,884.

So, Contribution Margin=$82,000- $5,884, which is equal to $76,116.

We…...

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