Salem Telephone Company

Question1:

Variable

Power

Operations: Hourly Personnel wages

Fixed

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

Question 2

Figure A

January

February

March

Quarter I

Power

1546/329=4.7

1485/316=4.7

1697/361=4.7

4728/1006=4.7

Operations: Hourly Personnel wages

7896/329=24

7584/316=24

8664/361=24

24144/1006=24

Question 3:

Figure B

Question 4

Intracompany sales = $400*205 = $82,000

Variable costs = $28.7*205 = $5,883.50

Fixed costs = $212,939

CM = $82,000 - $5,883.50 = $76,116.5

Revenue = Variable Cost * Fixed Costs

205 * $400 + X * $800 = (X+205) * ($28.7) + $212,939

82,000 + 800X = 28.7X + 5,883.5 + 212,939

771.3X = 136,882.5

X = 177.39 commerical hours sold to break even

Figure C

5

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