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Salem Telephone Company

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Submitted By fifishyu
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Salem Telephone Company

1.Variable Cost: Power, Operations: hourly personnel. Fixed Cost: Space cost-rent, Custodial services, Computer leases, Maintenance, Computer equipment depreciation, Office equipment and fixtures depreciation, Operations: salaried staff, systems development and maintenance, Administration, sales, sales promotion, Corporate services.
2. Cost per revenue hour=Cost/revenue hour
Power:
January: 1546/329=4.6991
February: 1485/316=4.6994
March: 1697/361=4.7008
Operations: Hourly personnel:
January: 7896/329=24
February: 7584/316=24
March: 8664/361=24
3.Total Revenue Hour=Intracompany Usage+ Commercial Revenue Hour=205+138=343Hours
According to the reading, intracompany work was billed at $400 per hour and commercial sales were billed at $800 per hour, so the total sales should equals 400*205+800*138=192,400
Variable Cost=Revenue Hours*Variable Cost per Revenue Hour =24*343 + 4.7*343 =9844.1
Fixed Cost=the sum of all of the fixed cost (Because Sales Promotion and corporate services are commercial usage, so calculating them at March level) = 8000 +1240 +95000 +5400 +25500 +680 +21600 +12000 +9000 +11200 +8083 +15236=212,939 Contribution Margin Income Statement
Sales 192,400
Variable Costs (9844.1)
Contribution Margin 182,555.9
Fixed Costs (212,939)
Net Income (30,383.1)
4.Sales revenue per unit: 400 Variable Cost per unit: 24+4.7=24.7
Intracompany sales=400*205=82,000
Variable cost=28.7*205=5,883.5
So the contribution margin equals

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