Salem Case Study

capital of Oregon info Services is currently operating with senior high school fixed expenses with respect to revenue enhancement hours that imply rent, custodial services, computer leases, operations salaried staff, maintenance, depreciation of computer equipment and office equipment and fixtures, systems organic evolution and maintenance, administration salaries, sales salaries, sales forward motions and corporate services. Their inconstant expenses include power and hourly personnel salary expense that monetary value $29 per hour (Fig. 1). These high be SDS faces make it genuinely difficult for them to achieve profitability. With current demand, the relatively low variable cost of the operation has provided a parcel margin of $370 dollars for intra-company sales and $771 for commercial sales. However, the high burden associated with fixed costs reflects a low contribution margin that jeopardizes the future of Salem Data Services. If demand for intra-company sales average 205 per month, commercial revenue hours must plus to 178 if Salem is to reach its breakeven point (Fig.2). The intracompany demand for Salem is constant per month; therefore, any summation in revenue will come from commercial sales. Salem can increase the price to $1000 per hour.

However, this could potentially lead to a 30% decrease in demand and would negatively impact revenue by increasing net loss of approximately $43,000. other option is to reduce the price to $600 per hour that should stimulate a 30% increase in demand, but this however would not help the bottom line. The net loss would actually increase to $34,000 in this example. A final option is to increase promotion which would hopefully increase revenue by 30%, and thence put Salem marginally in the black resulting in a net profit of $2000 (Fig. 3). Salem Data partnership is indeed a problem to Salem Telephone Company. Although the contribution from sales is relatively large, their exorbitant amount of fixed costs makes it very difficult for them to be profitable.... If you want to get a full essay, order it on our website: Orderessay

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