A computer subsidiary seems to be unsuccessful. Managers are to decide if it is rations in the pricing strategy or marketing will help increase the viability of the subsidiary. Provides a distinct difference between variable and fixed costs.A redrafted account of a previous case.
Caculating Variable Costs per Revenue Hour
Calculating Contribution Margin
Calculating Current Net Income
Calculating Break Even using Goal Seek
Maximum amount that can be spent on Sales Promotion while keeping net income above zero
Total Costs of Closing SDS
Total Expenses Saved of closing SDS
Calculation of Percentage unused hours
1. Which costs of Salem Data Services are fixed and which are variable? Make a list of each.
2. For each expense that is variable with respect to revenue hours, calculate the variable cost per revenue hour.
3. Compute a contribution margin per hour of revenue using 205 hours of intra-company usage plus commercial usage at the March level. Based on this analysis, how many commercial hours does Salem Data need to sell in order to finally break even?
4. On page 3 of the case, look at question 5 and compute the effect on income of each of the options that Flores is suggesting to Wu as possible strategic alternatives.
5. Is Salem Data Services really a problem to Flores and Salem Telephone Company? Should Flores insist on any of the suggested options or just be more patient for Salem Data Services to get into the black?