PRESTIGE TELEPHONE COMPANY

Submitted by:Aditya
Giriraj
Mayukh
Sandipan
Vinay

COST CLASSIFICATION

Fixed costs

Mixed costs / Variable costs

Space costs

Power

Equipment costs

Operations

Depreciation

Materials

Systems development

Sales promotions

Administration

Corporate services

Sales

Total hours

Power

Jan

Feb

Mar

361

348

401

Jan

Feb

Mar

1633

1592

1803

By using high low method:

1803 1592 = 211; 401 348 = 53
Variable component = 211/53 = $ 4 per hour
Fixed Component = 1803 (4 x 401) = $ 200

Total hours

Operations

Jan

Feb

Mar

329

316

361

Jan

Feb

Mar

29496

29184

30264

By using high low method:

30264 - 29184 = 1080; 361 - 316 = 45
Variable component = 1080/45 = $ 24 per hour
Fixed Component = 30264 (24 x 361) = $ 21,600

Total hours

Materials

Jan

Feb

Mar

361

348

401

Jan

Feb

Mar

9031

8731

10317

Variable component = 9031/361 = $ 25 per hour

Total hours

Sales
promotions

Jan

Feb

Mar

361

348

401

Jan

Feb

Mar

7909

7039

8083

Variable component = 7039/348 = $ 20 per hour

Therefore, total variable costs = 4 + 24 + 25 + 20 = $ 73 per hour

March

Option a

Option b

Total commercial hours

138

96.6

179.4

Selling price

800

1000

600

Variable cost

73

73

73

Contribution (A*(B-C))

100326

89548

94544

Therefore, income decreases in both options a and b.

c)
Total commercial hours in April = 138 x 1.3 = 179.4
Selling price = $ 800 per hour; Variable cost = $ 73 per hour
Contribution = 179.4 x (800 73) = $ 130,424
Therefore, amount available for promotions = 130424 100326 = $ 30,098

d)
Total commercial hours in April = 138 x 0.8 = 110.4
Selling price = $ 800 per hour; Variable cost = $ 73 per hour
Contribution = 110.4 x (800 73) = $ 80,261
Therefore, income is reduced by = 100326 80261 = $ 20,065

THANK YOU