Case Study
Prestige Telephone Co.
CLASSIFICATION OF COSTS Fixed costs: Space rent Custodial services Computer leases Maintenance Depreciation Power Wages: Operations Systems development Admnistration Sales Sales promotions Total fixed costs I Corporate services Total fixed costs II
Jan
Feb
Mar
Average
8.000 1.240 95.000 5.400 26.180
8.000 1.240 95.000 5.400 26.180
8.000 1.240 95.000 5.400 26.180
8.000 1.240 95.000 5.400 26.180 181
12.000 9.000 11.200 7.909
12.000 9.000 11.200 7.039
12.000 9.000 11.200 8.083
Variable cost per hour: Power Wages operations Materials Variable unit cost per hour
24.898 12.000 9.000 11.200 7.677 200.776 15.236 216.012
4,04 20,10 25,28 49,42
VARIABLE INCOME STATEMENT % Revenue: Intracompany Commercial Other Revenue Variable costs Contribution margin Fixed costs Net income (loss) Rounding error
@ João C. Neves, ISEG Lisbon, 2004
Price
Volume
Total
400 800
223 138
89.200 110.400 12.685 212.285 17.841 194.444 216.012 (21.568) (130)
6,36% 361
1
Case Study
Prestige Telephone Co.
BREAK-EVEN ANALYSIS Including Without corp. Corp.Services Services
Fixed cost to be covered by commercial sales: Fixed costs Other fixed revenues Contribution by intracompany sales Fixed costs to be covered by commercial sales Real No. Of commercial hours Contribution margin per hour of commercial sales: Price Variable cost Contribution margin per hour of commercial sales Break-even of commercial sales: No. Hours Revenue Safety margin
Cash Breakeven
216.012 12.685 78.179 125.148
200.776 12.685 78.179 109.912
189.832 12.685 78.179 98.968
138
138
138
800,00 49,42 750,58
800,00 49,42 750,58
800,00 49,42 750,58
167 133.600
146 116.800
132 105.600
21,0%
5,8%
-4,3%
a) 1000 -30% 96,6 950,58 91.826 103.580 -11.754
b) 600 30% 179,4 550,58 98.774 103.580 -4.806
c) 800,00 30% 179,4 750,58 134.654
Responses to questions: Change price to Variance on demand % New demand in No. Hours New unit contribution margin New contribution margin Previous contribution margin Incremental benefit Actual fixed costs Allowed increase in promotion d) Reduce to 16 hours in weekdays What are the savings? Basically personnel expenses in operations How much? There is an incremental loss
@ João C. Neves, ISEG Lisbon, 2004
d) 800,00 -20% 110,4 800,00 88.320 103.580 -15.260
125.148 9.506
33%
8.299 -6.961
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