Salem Telephone Case

995 WordsMar 1, 20144 Pages
1.) "Revenue hours" represent the key activity that drives costs at Salem Data Services. Which expenses in Exhibit 2 are variable with respect to revenue hours? Which expenses are fixed with respect to revenue hours? Variable: Wages of hourly personnel, Power Fixed: Rent, custodial services, computer leases, maintenance, depreciation, salaried staff wages, administration, sales, systems development, sales promotion, corporate services 2.) For each expense that is variable with respect to revenue hours, calculate the cost per revenue hour. a. Wages of hourly personnel Total wages of hourly personnel/total revenue hours = cost per revenue hour i. January: 7896/329 = $24 per revenue hour ii. Februrary: 7584/316 = $24 per…show more content…
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 by 30%). January February March Sales $ 235,040 $ 234,520 $ 259,480 Total Variable Costs $ 10,501 $ 10,232 $ 11,549 Contribution Margin $ 224,539 $ 224,288 $ 247,931 Total Fixed Costs $ 212,939 $ 212,939 $ 212,939 Net Operating Income $ 11,600 $ 11,349 $ 34,992 January Intercompany Sales = Commercial Sales = Variable Expenses = Contribution Margin = New Operating Income = February Intercompany Sales =
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