prestige-4343-additional notes (1)

prestige-4343-additional notes (1) - Prestige Telephone...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Prestige Telephone Company – AIM 4343 – 02/09/04 Top management of Prestige Telephone Company, is considering alternative courses of action which might be taken to improve the performance of a new subsidiary, Prestige Data Services. It was originally conceived as a mechanism by which high and nonregulated returns could be used to augment the profits of Prestige Telephone Company, while at the same time providing computer services to that company. The subsidiary’s performance has not lived up to expectations. Nevertheless, after two years of operation, Prestige Data Services has succeeded in coming on line with services needed by the parent company and is selling excess hours of capacity to outside customers at an increasing rate. The key issues relate to questions are whether the reports presently being prepared provide information necessary to answer the questions which top management is asking, and if they do not, what kind of analysis can help with the decisions being considered. Despite the fact that this case is quite straightforward, it provides ample information and data to analyze three tasks which are critical to effective management accounting. First, to analyze the results of operations as they have been reported, and to understand the origin and nature of receipts, revenues, expenditures and expenses. Second, to develop an understanding of the economics of a business and to use that understanding to forecast the potential change in income which would occur if various alternative courses of action were selected by management. And third, to understand the importance of the way in which cost information is reported, and the way in which accounting and reporting systems can be used to highlight the factors which are important to management and for appraisal of operations. Incremental Cost Analysis: Shut Down Prestige Data Services Vs. Retain the subsidiary
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/16/2012 for the course MBA 101 taught by Professor Wormer during the Spring '08 term at Indian Institute Of Management, Ahmedabad.

Page1 / 3

prestige-4343-additional notes (1) - Prestige Telephone...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online