Salem telephone company accounting case

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Equipment costs: 3. Although this problem was alleviated bythe Salem Data Services remained unprofitable and continued to have a large amount of hours available to sell.

Salem Data Services struggled to become a profitable institution after two years of operation.

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Flores belief was that with the company unregulated it would become a profitable business and prevent the need, in the future, to increase phone rates due to increasing costs at Salem Telephone. The analysis that follows will show that Salem Data Services will not be a problem to Salem Telephone and eventually make a profit by spending more on promotional activities to increase commercial hours, and by moving fixed costs into variable costs.

The expenses that are affected by revenue hours will therefore be variable expenses and those that are not will be fixed expenses.

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Therefore, they are fixed with respect to revenue hours. The reason the financial health of a company is important to see how risky investing in that company would be. Then decide if he will abort this service.

Simply using the amount of sales a company does is not enough to determine the financial health of a company. For every hour spent working, the company spends Salem Data Services would perform data processing for Salem Telephone Company as well as sell computer services to other firms. By Salem Data Service had finally overcome the problems experienced during startup and was running smoothly but their reporting had yet to show a profitable month. Besides, we can calculate the unit variable costs per revenue hour as follows Q2 : January 1, 7, 9, The reason the financial health of a company is important to see how risky investing in that company would be. Determining the actual fixed and variable costs will able our group to calculate the unit costs per commercial revenue hours. Fixed expenses with respect to revenue hours: Rent, custodial services, computer leases, maintenance, depreciation of computer equipment and office equipment and fixtures, operations salaried staff, systems development and maintenance, administration, and sales, sales promotions, corporate services. For each expense that is variable with respect to revenue hours, calculate the cost per revenue hour. Hareesh Naidu V. Which expenses in Exhibit 2 are variable with respect to revenue hours? Corporate services — administrative functions paid to STC for payroll, billing and accounting services are paid independent of revenues. Although some were skeptical about its replacement over telegrams, in the end the advent of this fine communication equipment has won the hearts of many. System development and maintenance — agreed upon amount to provide service to clients and maintain the systems and is paid independent of revenues. Salem Data Services would provide data processing services for the telephone company as well as outside companies.
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Salem Telephone Company Case Analysis