Prestige Telephone Company
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Prestige Data Service
2010 SUMMER
Executive Summary
To assist Prestige Telephone Company on making the decision of continue its subsidiary or not, this report provides an analysis of Prestige Data Service (the subsidiary) on the status quo revenues and costs, a prediction on its break even situation, as well as possible options to increase profit.
The report has its limitations due to insufficient detailed information on both other revenues and variable costs of Prestige Data Service. But under certain consumptions and calculation methods, as applied in the report, we can still figure out the optimal solutions. Revenues, costs and profits are expressed in terms of the company’s output after analyzing the underlying relations behind the data provided in Prestige Data Service’ statements in Excel, which is used to find out the breakeven situation. The concept of contribution margin is applied in the analysis of choosing the best available option. Besides, detailed information and calculations can be found in Appendix.
Results of analysis shows that though Prestige Data Service has been experiencing continuous loss ever since it was founded, it is still making progress on reducing the net loss and may be able to break even when their commercial sales reaches a certain amount. Hence, Prestige Telephone Company is recommended to keep the subsidiary for future benefits.
In order to generate greater profit in the future, Prestige Data Service should focus more on increasing promotions so that profit can be boost up. In the mean time, reducing commercial hour capacity will not be a suitable method to follow. Additionally, managers are urged to seek ways to reduce costs and improve efficiency in the long run.
Table of Contents Executive Summary 1 Introduction 2 1 Revenue Analysis 3 2 Cost Analysis 4 2.1 Fixed Costs 4 2.2 Variable Costs 4 2.2.1 Operation Wages and Salaries 4 2.2.2 Power Expense 4 2.3 Total Cost 5 3 Breakeven
Prestige Data Service
2010 SUMMER
Executive Summary
To assist Prestige Telephone Company on making the decision of continue its subsidiary or not, this report provides an analysis of Prestige Data Service (the subsidiary) on the status quo revenues and costs, a prediction on its break even situation, as well as possible options to increase profit.
The report has its limitations due to insufficient detailed information on both other revenues and variable costs of Prestige Data Service. But under certain consumptions and calculation methods, as applied in the report, we can still figure out the optimal solutions. Revenues, costs and profits are expressed in terms of the company’s output after analyzing the underlying relations behind the data provided in Prestige Data Service’ statements in Excel, which is used to find out the breakeven situation. The concept of contribution margin is applied in the analysis of choosing the best available option. Besides, detailed information and calculations can be found in Appendix.
Results of analysis shows that though Prestige Data Service has been experiencing continuous loss ever since it was founded, it is still making progress on reducing the net loss and may be able to break even when their commercial sales reaches a certain amount. Hence, Prestige Telephone Company is recommended to keep the subsidiary for future benefits.
In order to generate greater profit in the future, Prestige Data Service should focus more on increasing promotions so that profit can be boost up. In the mean time, reducing commercial hour capacity will not be a suitable method to follow. Additionally, managers are urged to seek ways to reduce costs and improve efficiency in the long run.
Table of Contents Executive Summary 1 Introduction 2 1 Revenue Analysis 3 2 Cost Analysis 4 2.1 Fixed Costs 4 2.2 Variable Costs 4 2.2.1 Operation Wages and Salaries 4 2.2.2 Power Expense 4 2.3 Total Cost 5 3 Breakeven