Salem Data Services

Salem Telephone Company Case Study

1.
I saw Sales Promotion for Salem Data being the VC because depending on how good business is doing (increased revenue and clients) would depend on how much money would need to be spent in promotions.

Variable cost:
Operations hourly personnel
Power
Fixed cost:
Space Costs
Equipment Costs
Wages and Salaries (minus hourly personnel)
Corporate Services

2. January February March
Hourly wages $7,896 $7,584 $8,664

Power $1,546 $1,485 $1,697

Hours 329 316 361

Hourly wages $7,896 / 329 $7584 / 316 $8664 / 361 $24.00 $24.00 $24.00

Power $1,546 / 329 $1,485 / 316 $1,697 / 361 $4.70 $4.70 $4.70

3.
Intra-company usage Commercial usage (March) Total hours 205 hours 138 hours 343 hours
205 * $400 = $82,000 138 * $800 = $110,400

Contribution Margin Income Statement

Intra-comp sales $82,000
Commercial sales $110,400
Total Revenue $192,400
Less Variable costs
Operations hourly wage ($24*343) $8,232
Sales Promotions ($4.70*343) $1,612 $9,844
Contribution Margin $182,256
Less Fixed costs
Space costs $9,240
Equipment costs $126,580
(minus Power)
Wages & Salaries $62,464
Corporate service $15,236 $213,520
Net Income (Loss) $(31,264)

4.8
Break-even sales in units:

CM Ratio = Contribution Margin / Sales = 182,256 / 192,400 = 0.9472

Break-even sales = TFC / CM Ratio
213,520 / 0.9472 = 225,422 – 82,000 (intra-comp sales) 143,422 / 800 = 179

5.
X = 138 * (1-0.30) = 97

205 * 400 + 97 * 1000 – 24 (205 + 97) – 213,520
82,000 + 97,000 – 7,248 – 213,520= - ($41,768)

X = 138 * (1+0.30) = 180

205 * 400 + 180 * 600 – 24 (205 + 180)