Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
DANIEL ROWE
PRESIDENT
SUSAN
BRADLEY
MANAGER
PRESTIGE
DATA
COMPANY
Provides data
processing and
computer services.
Subsidiary of Prestige
Telephone Company
Permitted by Public
Service Commission as
the primarys way of
reducing the need to
increase telephone rate
PROBLEMS
QUESTION 1
CONSIDERATIONS
Increasing demand
Loss is decreasing
significantly
KEEP
Total expense is still
$82,000
Primary gets revenue from
Space Cost and Corporate
Services = $24,579.67
Total Cost = ~$57,420.00
CLOSE
Total expense 205*800 =
$164000
RECOMMENDATION
Reduce operating hours to 16 hours
during weekdays
Consider lowering fixed cost in other
areas (e.g. wages)
Keep records of the utilization times.
QUESTION 2
Assuming the company
demand for service will
average 205 hours per
month, what level of
commercial sales of
computer use would be
necessary to break even
each month?
QUESTION 3
Estimate the effect on income of each of
the options Rowe has suggested if Bradley
estimates as follows:
a. Increasing the price to commercial
customers to $1000 per hour would
increase demand by 30 percent.
b. Reducing the price to commercial
customers to $600 per hour would increase
demand by 30 percent.
c. Increased promotion would increase
sales by up to 30 percent. Bradley is unsure
how much promotion this would take.
d. Reducing operations to 16 hours on
weekdays and eight hours on Saturdays
would result in a loss of 20 percent of
commercial revenue hours.
QUESTION 4
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?
Consolidated financial statements for both primary
and subsidiary. This is to show the true contribution
of the subsidiary to the primary as it is currently
seen as an expense when theres separate data.
When making decisions Prestige Data Services
should consider the variable costs and not just all
reported costs.