Prestige Telephone Company

Case: Prestige Telephone Company

Question 1:

Prestige Data Services(PDS) Income Statement View PDS The existence of financial losses and Available Hours Too many questions, but consider the following several points, Prestige Telephone Company(PTC) PDS To continue the operation.

1. Income Statement View PDS net loss $20,000-$40,000/per month But PDS Main business is providing services of the parent company, charges to limit rates. Assuming that PTC needs to seek external company charge for its services was higher than $400/per HR rate, high $100/per HR,PTC would have to pay an average of $20,500/per month cost.

2. PDS Equipment rental costs, such as immediate cessation of operations, PTC Burden must be before the end of (2000-2003) The remaining nine months of leasing costs $95,000 x9 =$855,000 ?

3. PDS Monthly lease PTC Cost $8000+Custodial service$1,240 , Such as PTC Cannot be sublet or used, will loss of income per month $9,240 ? In addition, thePDS using the PTC license fee part, such as the PDS out of Commission, comprehensive efficiency loss in this section.

4. Jan-Mar Income Statement Data, PDS Low variable costs, so more Commercial service hour Business, to share fixed costs to improve loss will be of great help.

Question 2:

Fixed cost projects (FC): space cost ($9,240)/equipment cost ($126,580)/Wages and salaries Teams pay ($21,600) +system development & maintenance ($12,000) +administration ($9,000) +sales ($11,200)

Others considered a fixed cost ( Jan-Mar average): Materials ($9,360)/sales promotion ($7,677)/Corporate Services ($15,340)

Total fixed costs : $221,997

Variable cost (VC): Power/operation salary

Power: $5/per hour (power expense/revenue hr)

Operation salary:

Jan/03 : 29496 = Team fixed salary + Assist staff salary *329 hrs

Feb/03: 29814= Team fixed salary + Assist staff salary *316 hrs

Team fixed salary (FC) = $21600

Assist staff salary (VC) = $24/per hour

Total variable costs : $29/per hour

Intercompany hour 205hrs/per month ? other revenue Assumed to be Jan-Mar Average $10,370

$400*205 + commercial hrs*800+$10,370 = $221,997 + $29* (205+ commercial hrs)

Monthly intercompany svc 205 hrs ? commercial svc hr You want 176hrs break-even ?

Qestion 3:

a. Revenue loss/gain if hr charge is up to $1000/per hr, commercial hr is down 30%:

Jan-Mar avg commercial hr: 132

132*800=$105,600

(132*0.7) *1000=$92,400

VC saving = (132*0.3)*29 = $1,148

$92,400+$1,148 – $105,600= ($12,052)

From this programme can be better than the status quo net loss $12,052 ?

b. Revenue loss/gain if hr charge is down to $600/per hr, commercial hr is up 30%:

132*800=$105,600