Salem Telephone Case Study

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?

Irrelevant Costs, Insurance (General Liability, Physical Damage, Workers Compensation, Health insurance), Security, Depreciation, Salaries Benefits, Bad Debt Expense, Permits, Rental Equipment, Payroll Taxes, Accounting Fees, Supplies, Computer Maintenance, Miscellaneous.

In Exhibit 2, Salem Data Services Summary (SDS) Results of Operations, First Quarter 2004, it focuses on fixed expenses and variable expenses. It is essential for SDS to understand their business costs. The fixed costs are those expenses that do not fluctuate with changes in the level of business activity. According to SDS Q1 report, these expenditures include items such as expenses, equipment costs, wages and salaries. The Variable costs are expenses that vary depending on a company's production volume that can either increase or decrease. The variable costs are the power and operations hourly personnel.

Question 3: Identify all costs associated with this venture. Categorize these costs as fixed or variable.

Nearly every form of religion in the world has a religious enemy most likely Satan or a devilish creature and all around the world during the civilized eighteenth century, much were executed due to the suspicion of the the prominent work of Satan also known as witchcraft the credibility although can all be given to mass hysteria a force in which uncontrollable fear affects behavior and passes from one to another. Particularly in the very new and non-popular site of the New World, Salem Village (United States).

Fixed costs are what it costs a company to run before they make any products irrespective of the level of activity e.g. rent & rates, insurance, salaries, utilities.

| (TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would:

3. For each of the individual overhead accounts at Bridgeton, do you believe the given cost is variable, fixed, or something else? Why? (Use information or evidence from the case to support your evaluation, if possible. For most of these costs, there is no single right answer from the case information, so the goal is to come up with a reasonable estimate.)

Staff travel, transport and accommodation- Cost of staff travel and associated costs for sales, etc.;

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.

3 variable costs indentified, they are power, operations, material. They are proportional to the revenue intake.

There are different costs that respond to the different activities like variable costs are directly associated with the products sold. The cost behavior patterns of selling, general, administrative, and other operating expenses are determined, and these expenses are budgeted accordingly. For example, sales commissions will be a function of the forecast of either sales dollars or units. The historical pattern of some expenses will be affected by changes in strategy that management may plan for the budget period. In a participative budgeting system, the manager of each department or cost responsibility center will submit the anticipated cost of the department 's planned activities, along with descriptions of the activities and explanations of significant differences from past experience. After review by higher levels of management, and perhaps negotiation, a final budget will be established. Because of the necessity to recognize cost behavior patterns for planning and control purposes, overhead costs will be classified as variable or fixed.

Fixed costs are those which do not change with the level of activity within the relevant range. These costs will incur even if no units are produced. For example rent expense, straight-line depreciation expense, etc.

Prestige Data Service has two variable costs: operation wages (or salaries) and power expense. However, both of them are quasi-fixed costs. This means that they have a fixed component and partly depend on the total revenue hours. Operation wages (or salaries) consists of fixed salaries and variable wages. Power expense is also a quasi-fixed expense which has monthly fixed power cost and variable cost. Since we have high frequency cost and output data, we can use excel to figure out relatively