Essay About 800T And Variable Expenses

Salem Telephone
Salem Telephone
1. Variable expenses:           Power**           Salary of hourly personnel    Fixed expenses:           Rent           Custodial Services         Computer Leases        Maintenance        Depreciation                Computer Equipment                Office Equipment or fixtures           Wage of salaried StaffWage of Systems development and maintenance           Wage of Administration           Wage of Sales           Sales Promotion*           Corporate Services**We categorize sales promotion and corporate services as fixed expenses because their amount does not relate to revenue hours. Accounts are only regarded as variable when dealing directly with income-generating activities. Sales promotion and corporate services do not fit this definition. Therefore, even though they fluctuate from month to month, they should be treated as fixed expenses.**We list power as a variable expense because it is consumed in order to produce revenue, and therefore directly related to revenue hours. Salespersons use power to make calls, and computers use power to process data for customers.2.Power:        January: 2046/329 = 6.22            February: 1985/316 = 6.28            March: 2197/361 = 6.09Hourly Personnel:        January:7896/329 = 24        February:7584/316 = 24        March:8664/361 = 24Total Variable Costs per revenue hour:        January: 9,942/329 = 30        February: 9,569/316 = 30        March: 10,861/361 = 303.Contribution Margin Income StatementFirst Quarter, 2004RevenueIntracompany Sales82,000Commercial Sales110,400Total Revenue192,400Variable CostsPower2,0[a][b][c]88 (6.09*205+6.09*138)Hourly Personnel8,232Contribution Margin182,080Fixed CostsRentCustodial Services Computer LeasesMaintenanceDepreciation             -Computer Equipment             -Office Equipment or fixturesWages and Salaries             -Staff             -Systems D & M             -Administration             -SalesSales PromotionCorporate Services8,0001,24095,0005,40025,50068021,60012,0009,00011,2008,08315,236Total Fixed Costs212,939Net income-30,8594. (205*400 + T *800) – 30.09 *(205+T) – 212,939 = 0**(Intracompany Demand*Intracompany work rate + T*Sales rate) – Variable Rate*(Intracompany Demand+T) – Total Fixed Costs = 082,000 + 800T – 6,150 – 30T – 212,939 = 0770T = 137,089T = 178.04 = Number of commercial revenue hours of computer use needed to break even