Salem Telephone Company Case Study

Published: 2021-06-29 06:59:11
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Category: Business

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Salem Telephone Company Case Study

Group 9

1) The costs that vary as a result of revenue hours are power and hourly personnel costs. As additional revenue hours are realized, the cost to power the computers and to pay the personnel to assist commercial consumers will increase. Each additional revenue hour results in an increase in expenses.

Rent, custodial services, computer leases, maintenance, computer equipment, office equipment and fixtures, salaried staff, systems development and maintenance, administration and sales are all fixed. These expenses are not dependent on the number of revenue hours and are all fixed across the three months. The expenses will be incurred whether 0 or 200 revenue hours are realized.

Sales promotion and corporate services costs are variable, but they are not dependent on the number of revenue hours. Sales promotion expenses are independent of revenue hours. While the sales promotion expenses would reasonably be expected to rise as the expected revenue rises, there is no direct correlation to the revenue hours. The corporate services expense category is based on total wages and salaries, accounts receivable, and past-due accounts. The corporate services expense is variable only to the extent that hourly personnel make up the total corporate service expense balance. Because this value is not solely tied to revenue hours, corporate services must be treated as a fixed cost related to revenue hours.

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