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Salem Telephone Case Study

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1) Variable expenses in relation to Revenue Hours are Power, Wages of Hourly Personnel, Corporate services, and Sales Promotions.

Variable Expenses | January | February | March | Power | $1546 | $1485 | $1697 | Hourly Personnel | $7896 | $7584 | $8664 | Corporate Services | $15,424 | $15,359 | $15,236 | Sales Promotions | $7,909 | $7,039 | $8,083 | TOTAL VC | $32,775 | $31,467 | $33,680 |

FixedExpenses | January | February | March | Space Costs | $9,240 | $9,240 | $9,240 | Equipment Costs | $126,580 | $126,580 | $126,580 | Salaries | $53,800 | $53,800 | 53,800 | TOTAL FC | $189,620 | $189,620 | $189,620 |

2) Cost per Revenue Hour for Variable Expenses:

Revenue Hours> | January329 | February316 | March361 | Power | $1546 | $1485 | $1697 | Cost/Revenue Hr. | $4.70/hr. | $4.70/hr. | $4.70/hr. | Hourly Personnel | $7896 | $7584 | $8664 | Cost/Revenue Hr. | $24/hr. | $24/hr. | $24/hr. | Corporate Services | $15,424 | $15,359 | $15,236 | Cost/Revenue Hr. | $46.88 | $48.60 | $42.20 | Sales Promotions | $7,909 | $7,039 | $8,083 | Cost/Revenue Hr. | $24.04/hr. | $22.28/hr. | $22.39/hr. |

3) Contribution margin income statement for Salem Data Services
Assumption: Intra company usage=205 hours; Commercial usage for March=138 hours

Revenue Hours Intra company: 205 Commercial: 138
Total Revenue Hours: 343

Salem Data Services Income Statement | | Revenues | | Intra company sales | $82,000 | Commercial Sales | 110,400 | TOTAL REVENUE | $192,400 | | | LESS Variable Expenses | | Power | $1612.10 | Hourly Personnel | 8,232 | Corporate Services | 14,474.60 | Sales Promotions | 7,679.77 | TOTAL VARIABLE COSTS | $31,998.47 | CONTRIBUTION MARGIN | $160,401.53 | | | LESS FIXED EXPENSES...

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