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Salem

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Submitted By minisuni2010
Words 730
Pages 3
Salem Telephone Company | Accounting 5302 | |

Summary:
Salem Data Services is a subsidiary of Salem Telephone Company. In this report we analyze and discuss the impact of Salem Data Services on its parent company and determine the best course of action for Salem’s Management to undergo.

Expenses:
We analyzed the expenses of Salem Data Services to better understand their cost structure and determined their variable and fixed expenses. We used the fact that revenue hours are the cost driver for Salem Data Services to determine variable expenses. We concluded power and hourly staff expenses to be variable because the per revenue hour cost is constant as revenue hours vary.

| Variable | Fixed | | - Power- Operations: Hourly Personnel | - Space Costs Rent Custodial services | | | | | - Equipment Costs (less Power) Computer Leases Maintenance Depreciation Computer Equipment Office Equipment and fixtures | | | | - Operation: Salaried Staff | | | | | - Systems Development & Maintenance | | | - Administration | | | | | - Sales | | | | | | - Sales Promotions | | | | | - Corporate Services | | |

We further analyzed variable expenses to determine their cost per revenue and its impact on the total variable cost and contribution margin.

Power | January | February | March | Total | Cost/hour | Sales | $1546 | $1485 | $1697 | $4728 | $47281006=$4.70/hr | Revenue Hours | 329 | 316 | 361 | 1006 | |

Hourly personnel | January | February | March | Total | Cost/hour | Sales | $7896 | $7584 | $8664 | $24144 | $241441006=$24/hr | Revenue Hours | 329 | 316 | 361 | 1006 | |

Therefore, Variable costs per revenue per hours: 4.70+24.00= $28.70/hour.

Contribution Margin Statement:

Salem Data Services |

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