Bridgeton Paper

1671 Words7 Pages
AMIS 4310


Seligram, Inc.: Electronic Testing Operations

1. What caused the existing system at ETO to fail?

2. Calculate the reported cost of the five components listed in Exhibit 6 using:

a. The existing system.

b. The system proposed by the accounting manager.

c. The system proposed by the consultant.

3. Which system is preferable? Why?

4. Would you recommend any changes to the system you prefer? Why?

5. Would you treat the new machine as a separate cost center or as a part of the main test room?

Bridgeton Industries: Automotive Component & Fabrication Plant

1. The official overhead allocation rate used in the 1987 model year strategy study at the
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3. Create a contribution margin income statement for Salem Data Services. Assume that inter-company usage is 205 hours. Assume commercial usage is at the March level.

4. Assuming the intracompany 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. Since the intracompany demand is known to be 205 hours, the contribution from these sales is assured to cover a portion of the fixed costs. Thus, to determine the level of commercial revenue hours required to break even, the contribution from commercial sales only needs to cover the fixed costs remaining after subtracting the fixed costs already covered by the contribution from intracompany sales.

5. Estimate the effect on income of each of the options Flores has suggested if Wu estimates them as follows:

• Increasing the price to commercial customers to $1,000 per hour (this would reduce external demand by 30%).

• Reducing the price to commercial customers to $600 per hour (this would increase external demand by 30%).

• Increased promotion would increase revenue hours by up to 30%. Wu is unsure how much promotion this would take. (How much could be spent and still leave Salem Data Services with no reported loss each month if commercial hours were increased 30%?).

6. Based on your analysis above, is Salem Data Services really a problem to Salem Telephone Company? What
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