Prestige Telephone Co.

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Exhibit 1 Prestige Data Services Summary of Computer Utilization, F

Revenue Hours January February March

Intercompany 206 181 223

Commercial 123 135 138
Total revenue hou 329 316 361
Service hours 32 32 40
Available hours 223 164 143
Total hours 584 512 544
Exhibit 2 Prestige Data Services Summary Results of Operations, First Quarter 2003

January February March

Revenues
Intercompany sales $82,400 $72,400 $89,200
Commercial sales
Computer use 98,400 1,08,000 1,10,400
Other 9,241 9,184 12,685
Total revenue $1,90,041 $1,89,584 $2,12,285
Expenses
Space costs:
Rent $8,000 $8,000 $8,000
Custodial services 1,240 1,240 1,240
9,240 9,240 9,240
Equipment costs
Computer leases 95,000 95,000 95,000
Maintenance 5,400 5,400 5,400
Depreciation:
Computer equipment 25,500 25,500 25,500
Office equipment and fixtures 680 680 680
Power 1,633 1,592 1,803
1,28,213 1,28,172 1,28,383
Wages and salaries
Operations 29,496 29,184 30,264
Systems development and mainten 12,000 12,000 12,000
Administration 9,000 9,000 9,000
Sales 11,200 11,200 11,200
61,696 61,384 62,464/
Materials 9,031 8,731 10,317
Sales promotions 7,909 7,039 8,083
Corporate services 15,424 15,359 15,236
Total expenses $2,31,513 $2,29,925 $2,33,723
Net income (loss) -$41,472 -$40,341 -$21,438
 We should only consider fixed and variable costs and not the sunk costs while makin

Shut down

Market value of services/ month 164000 Total loss in 3 months

Total loss/expense for 3 months 492000

If we remove the sunk cost from the costing, we actually get a profit. Th
should continue with the susidiary
not the sunk costs while making a decision

Retention

Total loss in 3 months -103251

Add:Sunk cost 285000
Net profit/loss $ 1,81,749.00

ng, we actually get a profit. This means that we

e with the susidiary
Exhibit 2 Prestige Data Services Summary Results of Operations, F

January February March April

Revenues
Intercompany sale $82,400 $72,400 $89,200 $82,000
Commercial sales
Computer use 98,400 1,08,000 1,10,400 151238.4168757
Other 9,241 9,184 12,685 0
Total revenue $1,90,041 $1,89,584 $2,12,285 233238.4168757
Expenses
Space costs:
Rent $8,000 $8,000 $8,000 $8,000
Custodial services 1,240 1,240 1,240 1,240
9,240 9,240 9,240 9,240
Equipment costs
Computer leases 95,000 95,000 95,000 95,000
Maintenance 5,400 5,400 5,400 5,400
Depreciation:
Computer equipme 25,500 25,500 25,500 25,500
Office equipment a 680 680 680 680
Power 1,633 1,592 1,803 1,785
1,28,213 1,28,172 1,28,383 128,365
Wages and salaries
Operations 29,496 29,184 30,264 31,057
Systems developm 12,000 12,000 12,000 12,000
Administration 9,000 9,000 9,000 9,000
Sales 11,200 11,200 11,200 11,200
61,696 61,384 62,464/ 63,257
Materials 9,031 8,731 10,317 9,360
Sales promotions 7,909 7,039 8,083 7,677
Corporate service 15,424 15,359 15,236 15,340
Total expenses $2,31,513 $2,29,925 $2,33,723 233,238
Net income (loss) -$41,472 -$40,341 -$21,438 $0

329 316 361

Avg Fixed Cost per month 221,996

Variable costs

Power 4.53
Operational wages 24
Total variable cost 28.53

Contribution margin 771.47

Breakeven units 189.048

Breakeven sales 151238.42

Exhibit 1 Prestige Data Services Summary of Computer Utilization, F

Revenue Hours January February March Q3.(A)

Intercompany 206 181 223

Commercial 123 135 138 96.6
Total revenue hou 329 316 361
Service hours 32 32 40
Available hours 223 164 143
Total hours 584 512 544
Contribution per
hour: $771.47 $971.47

Income: $106,462.90 $93,844.03

Loss: ` $12,618.87
Q3.(B) Q3.(C)

179.4 14560 Sales

179.4 Commercial hours

$571.47 $771.47

$102,521.77 $138,401.77
$3,941.13 $31,938.87
Q3.(D)

110.4

$771.47

$85,170.32
$21,292.58
Can you suggest changes in the accounting and reporting system now used for operations of Prestige Data
services which would result in more useful information for Rowe and Bradley?

Answer 4:

We would like to suggest Prestige Data services to use consolidated financial statements for the parent and subsidiaries as
these statements will show the true contribution that the Prestige Data Service is providing for Prestige Telephone Company.
There are certain costs within Prestige Date that benefit the parent company but they are only being seen as expenses to
Prestige Data Services and are not showing how these services are providing revenue for Prestige Telephone Company. So,
when making decisions Prestige Data Services should consider the variable costs and not just all reported costs.
e parent and subsidiaries as
restige Telephone Company.
being seen as expenses to
ge Telephone Company. So,
just all reported costs.