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Revenue Hours Jan Feb March

Intercompany 206 181 223


Commercial 123 135 138
Total Revenue Hours 329 316 361
Service Hours 32 32 40
Available Hours 223 164 143
Total Hours 584 512 544
Revenues Jan Feb March
Intercompany Sales $82,400 $72,400 $89,200
Commercial Sales
Computer Use $98,400 $108,000 $110,400
Other $9,241 $9,184 $12,685
Total Revenue $190,041 $189,584 $212,285
Expenses
Space Costs
Rent $8,000 $8,000 $8,000
Custodial Services $1,240 $1,240 $1,240
Equipment Cost
Computer Leases $95,000 $95,000 $95,000
Maintenance $5,400 $5,400 $5,400
Depreciation
Computer Equipment $25,500 $25,500 $25,500
Office Equipment & Fixtures $680 $680 $680
Power $1,633 $1,592 $1,803
Wages And Salaries
Operations
Fixed $21,600 $21,600 $21,600
Variable cost $7,896 $7,584 $8,664
System Development & Maintenance $12,000 $12,000 $12,000
Administration $9,000 $9,000 $9,000
Sales $11,200 $11,200 $11,200
Materials $9,031 $8,731 $10,317
Sales Promotions $7,909 $7,039 $8,083
Corporate Services $15,424 $15,359 $15,236
Total Expenses $231,513 $229,925 $233,723
Net Income (Loss) -$41,472 -$40,341 -$21,438
Operations Salaries & Wages Distribution
Jan Feb March
Salaries 21600 21600 21600
Wages $/Hr 24 24 24
Billed Hr 329 316 361
Total 29,496 29,184 30,264
Intra Company
Sales
Commercial
Sales
Price /Hr 400 800
Varible Cost /Hr 24 24
Contribution Margin/Hr 376 776
Break Even Analysis
S.No Description Amount/Hr
A Monthly Avg Fixed Cost 199,093
B Inter Company Sales (hours) 205
C Contribtion Margin /Hr 376
D Inter company Contribtion Margin 77,080
E
Fixed Cost to be Recoverd from
Commercial Sales
122,013
D Contribtion Margin /Hr 776
G Break Even Commercial Hours 157
Intra Company
Sales
Commercial
Sales
Avg Monthly Hours 203 132
Price /Hr 400 800
Varible Cost /Hr 24 24
Contribution Margin/Hr 376 776
Option (a)
Increasing Price to Commercial Customers to $1000/hr ,Demand Reduction by 30%
Original Option
Hours 132 92.40
Price/Hr $800 $1,000
Variable Cost /Hr $24 $24
Contribution Margin/Hr $776 $976
Total Contribution Margin $102,432 $90,182
Contribution Margin will reduce by $12,250
Not recommended to utilize the option.
Option (b)
Decreasinng Price to Commercial Customers to $600/hr ,Demand increase by 30%
Original Option
Hours 132 172
Price/Hr $800 $600
Variable Cost /Hr $24 $24
Contribution Margin/Hr $776 $576
Total Contribution Margin $102,432 $98,842
Contribution Margin will reduce by $3,590
Not recommended to utilize the option.
Option (c)
Incresed promotion will increase demand by 30%
Original Option
Hours 132 172
Price/Hr $800 $800
Variable Cost /Hr $24 $24
Contribution Margin/Hr $776 $776
Total Contribution Margin $102,432 $133,162
Avg Contribution Margin will go up by $30,730
Max $30,730 can be spent on promotion without having any negative impact.
Option (d)
Reducing Operation hours to 16 on Weekdays & 8 on saturdays,20% Commecia Sales Reduction
Original Option
Hours 132 105.60
Price/Hr $800 $800
Variable Cost /Hr $24 $24
Contribution Margin/Hr $776 $776
Total Contribution Margin $102,432 $81,946
Contribution Margin will reduce by $17,917
No clear reduction in Fixed Cost is visible.
Power Cost is Likely to be reduced by Approx 1/3 Amount
Increasing Price to Commercial Customers to $1000/hr ,Demand Reduction by 30%
Remarks
30% Reduction in Demand
Price up by $200/hr
No change
-$12,250
Decreasinng Price to Commercial Customers to $600/hr ,Demand increase by 30%
Remarks
30% increase in Demand
Price up by $200/hr
No change
-$3,590
Remarks
30% increase in Demand
Price up by $200/hr
No change
$30,730
Max $30,730 can be spent on promotion without having any negative impact.
Reducing Operation hours to 16 on Weekdays & 8 on saturdays,20% Commecia Sales Reduction
Remarks
20% Reduction in Demand
No change
-$20,486
Revenues Jan Feb
$82,400 $72,400
Computer Use (Hours X $800/Hr) $98,400 $108,000
Other Income $9,241 $9,184
Total Revenue $190,041 $189,584
Variable Expenses Wages $7,896 $7,584
Contribution Margin $182,145 $182,000
Fixed Expenses
Computer Leases $95,000 $95,000
Maintenance $5,400 $5,400
Computer Equipment $25,500 $25,500
Office Equipment & Fixtures $680 $680
Power $1,633 $1,592
Operations $21,600 $21,600
System Development & Mtc $12,000 $12,000
Administration $9,000 $9,000
Sales $11,200 $11,200
Materials $9,031 $8,731
Sales Promotions $7,909 $7,039
Total Fixed expenses $198,953 $197,742
Net Operating Income (Loss) -$16,808 -$15,742
Remarks/Assumptions
Intracompany Sales (Hours X $400/Hr)
1. Intracompany Expense payment of Rent,Custodial Services & Corporate Services removed,
Assumed as these Inhouse services are not marketable & No cost reduction will be there for
Telephone Compnay if discontinuied.
2. Materials ,Power ,Sales Promotions in someway moving with Revenue Hours. But no direct
relation was Visible. It represents semi Fixed Costs. Due to lack of details, assumed as fixed Cost.
Depreciation
Equipment Cost
Salaries
Commercial Sales
March
$89,200
$110,400
$12,685
$212,285
$8,664
$203,621
$95,000
$5,400
$25,500
$680
$1,803
$21,600
$12,000
$9,000
$11,200
$10,317
$8,083
$200,583
$3,038
1. Intracompany Expense payment of Rent,Custodial Services & Corporate Services removed,
Assumed as these Inhouse services are not marketable & No cost reduction will be there for
Telephone Compnay if discontinuied.
2. Materials ,Power ,Sales Promotions in someway moving with Revenue Hours. But no direct
relation was Visible. It represents semi Fixed Costs. Due to lack of details, assumed as fixed Cost.
Decision : Closing Prestige Data Services or Not
Additional Costs and Contribution Margin Reduction (Monthly)
S.No Description in $
1
Additional cost on Account of Market Rate
Billing
82,000
2 Contribution Margin forgone 189,255
Total 271,255
Fixed Cost Reduction (Monthly)
S.No Description in $
1 Maintenance 5,400
2 Power Cost 1,676
3 Materials Cost 9,360
4 Sales Promotion Cost 7,677
5 Fixed Salaries 53,800
6 Fixed Assets 26,180
Total 104,093
Monthly Impact of Closing Subsidary -167,163
Addition impact of 4 year Lease -4,560,000
Assumptions/Remarks
1. Telephone Company Will not be able to Realise Rent in Market.
2. Telephone Company Will not be able to Reduce any cost on account of Not giving Custodial & Coporate
Services to data Company.
Remarks
Market Rate is $800/hr,Current Billing
Rate is $400/Hr
Avg Monthly Contribution Margin
Remarks
System Development &
Maintenance,Admin & Sales Staff
As they will be sold at Book Value
1. Telephone Company Will not be able to Realise Rent in Market.
2. Telephone Company Will not be able to Reduce any cost on account of Not giving Custodial & Coporate
Services to data Company.