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Prestige Telephone Company

Revenue Hours
Intercompany Hours
Commercial Hours
Total Revenue Hours

1.

Contribution Income Statement


Jan
Feb
206

123
329

Mar

181

135
316

Average

223

203

138
132
361 335.33333

Revenue
Intercompany sales
Commercial sales
Other Revenue
Total Revenue

82,400
98,400
9,241

72,400
108,000
9,184

89,200
110,400
12,685

81,333
105,600
10,370

190,041

189,584

212,285

197,303

Variable Costs
Power
Wages & Salaries
Materials
Sales promotions
Corporate services
Total Variable Costs

1,633
29,496
9,031
7,909
15,424
63,493

1,592
29,184
8,731
7,039
15,359
61,905

1,803
30,264
10,317
8,083
15,236
65,703

1,676
29,648
9,360
7,677
15,340
63,701

Contribution Margin

126,548

127,679

146,582

133,602

Fixed Costs
Rent
Custodial services
Computer leases
Maintenance
Dep. on Computer equipment
Dep. Office equipment & fixtures
Systems development & maintenance wages
Administration Salaries
Sales Salaries
Total Fixed Costs

8,000
1,240
95,000
5,400
25,500
680
12,000
9,000
11,200
168,020

8,000
1,240
95,000
5,400
25,500
680
12,000
9,000
11,200
168,020

8,000
1,240
95,000
5,400
25,500
680
12,000
9,000
11,200
168,020

8,000
1,240
95,000
5,400
25,500
680
12,000
9,000
11,200
168,020

Operating Income

-41,472

-40,341

-21,438

-34,418

BreakEven (sales volume)

436.819073 415.8422293

413.797192 421.7194809

2. If avg company demand is 205 hrs per month then corresponding commercial sales required would
be 204, 111 & 156 hours for the 3 months respectively
3. a- Operating income would be $-53,772, $-53,841 & $-35,238 respectively for the given months
b- Operating income would be $-43,932, $-43,041 & $ -24,198 respectively for the given months
c- He should decrease variable spending by $11,952 & $7,941 for the first 2 months as the given
approach will keep her profits below 0. In March, he could spend $11,682 and still earn 0 profit.
d-This approach would further reduce profits and operating income will be $-61,152,$-61,94 &
$-43,518 respectively.
4. For better decision making, they should implement the following changes:
They should also provide Contribution Income Statement along with the other financial statements
each quarter.
They should correctly recognize fixed & variable costs for each category.

Gaurav Gupta
FP/20/13