Salem Telephone Company
Salem Telephone Company
Looking at Exhibit 2 in the case the expenses that appear to be variable costs with respect to revenue hours include, Power, Operations: Hourly Personnel, Sales Promotion. The fixed costs with respect to revenue hours include rent, custodial services, computer leases, depreciation, maintenance, salaried staff, system development and maintenance, administration, sales, and corporate services. (Corporate services because even though they fluctuate they are based on other variables but are not all variables I thought that fluctuated as much as some of the variable costs?)
Variable costs
January
February
March
Power
Hourly Personnel
Sales Promotion
Variable Costs/ hr
17351/329=$52
16108/316=$51
18444/361=$51
Contribution Income Statement:
Revenues:
Revenues
Intracompany Revenue (@$400,205 hours)
82000
Commercial Revenue (@$800, 138 hours)
110400
Total Revenue
192400
Variable Costs (@$51)
(17493)
Contribution Margin
174907
Fixed Costs
Custodial Services
Computer Leases
95000
Depreciation
26180
Maintenance
Salaried Staff
21600
System Development and Maintenance
12000
Administration
Sales
11200
Corporate Services (March value)
15236
Total Fixed Costs
204856
Profit
$-29949
Break Even Analysis:
Revenue= Variable Costs + Fixed Costs
Revenue= 205*400+x*800