SALEM... - Rehma Mohamed Professor Elrod Case Analysis...

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Rehma Mohamed Professor Elrod Case Analysis Plan—Salem Telephone Company 1. “Revenue hours” represent the key activity that drives costs at Salem Data Services. Which expenses in Exhibit 2 are variable with respect to revenue hours? Which expenses are fixed with respect to revenue hours? The variable expenses with respect to revenue hours are: o Hourly personnel salaries expense o Power expense The expenses that are fixed with respect to revenue hours are rent, custodial services, computer leases, maintenance, depreciation of computer equipment, office equipment and fixtures, operations: salaried staff, systems development and maintenance, administration and sales, and sales promotion and corporate services. 2. For each expense that is variable with respect to revenue hours, calculate the cost per revenue hour. January o 1,546/329 = $4.70 o 7,896/329 = $24 o = 24 + 4.7 = $28.70 February o 1,485/316 = $4.70 o 7,584/316 = $24 o 24 + 4.7 = $28.70 March o 1,697/361 = $4.70 o 8,664/361 = $24 o 24 + 4.7 = $28.70 3. Create a contribution margin income statement for Salem Data Services.
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