Accounting Report Prestige Telephone Company
Course Subject: Accounting for Decision-making
Course Code : GSM5301
Group : 8
Case Study : Prestige Telephone Company
Background of Case Study In April 1997, president of Prestige Telephone Company (PTC), Daniel Rowe, was making arrangements to meet with its computer data service subsidiary Prestige Data Services’ (henceforth PDS) manager Susan Bradley. This subsidiary performs data processing for the telephone company and sells computer services to other companies. In 1994, Rowe suggested that productive computer services subsidiary will decrease the telephone rate rise’s pressure, but it was still not profitable at the end of 1996. Rowe felt the need to cut down the company resources’ drain. PDS grew out of PTC’s needs for computer services for its own operations for its metropolitan region. Prestige realized that the metropolitan region’s other businesses required like services and that centralized services can be given over telephone circuits hinted that it could sell computer time that is not required by telephone operations.
Also, every public utility under the jurisdiction of the Public Service Commission (PSC) were asked to find fresh resources of revenue for deregulation and to decrease the need for increase in rates that higher costs would cause otherwise. Due to its function as a public utility, the rates PTC charged could not be altered without PSC’s approval. To present the new subsidiary’s proposal, Rowe put forth an argument for a unique but completely owned entity whose prices for service would not be regularized. This is so that Prestige can contend with other organisations in an active field. Also, profits for telephone services usage might also be raised. Subject to the mean monthly charge for service by PDS to PTC not exceeding the cost of equivalent services used by PTC which was estimated in 1994 ($82,000), the commission accepted the proposal.
PDS has been having problems since its inception in 1995 – delay in equipment
Course Code : GSM5301
Group : 8
Case Study : Prestige Telephone Company
Background of Case Study In April 1997, president of Prestige Telephone Company (PTC), Daniel Rowe, was making arrangements to meet with its computer data service subsidiary Prestige Data Services’ (henceforth PDS) manager Susan Bradley. This subsidiary performs data processing for the telephone company and sells computer services to other companies. In 1994, Rowe suggested that productive computer services subsidiary will decrease the telephone rate rise’s pressure, but it was still not profitable at the end of 1996. Rowe felt the need to cut down the company resources’ drain. PDS grew out of PTC’s needs for computer services for its own operations for its metropolitan region. Prestige realized that the metropolitan region’s other businesses required like services and that centralized services can be given over telephone circuits hinted that it could sell computer time that is not required by telephone operations.
Also, every public utility under the jurisdiction of the Public Service Commission (PSC) were asked to find fresh resources of revenue for deregulation and to decrease the need for increase in rates that higher costs would cause otherwise. Due to its function as a public utility, the rates PTC charged could not be altered without PSC’s approval. To present the new subsidiary’s proposal, Rowe put forth an argument for a unique but completely owned entity whose prices for service would not be regularized. This is so that Prestige can contend with other organisations in an active field. Also, profits for telephone services usage might also be raised. Subject to the mean monthly charge for service by PDS to PTC not exceeding the cost of equivalent services used by PTC which was estimated in 1994 ($82,000), the commission accepted the proposal.
PDS has been having problems since its inception in 1995 – delay in equipment
References: Accounting for Decision Making; McGraw-Hill Education (Asia) Harvard Business School Case 197-097; Harvard College