Salem Case Write Up

| The Hipsters| capital of Oregon bring forward caller To:Dr. Searcy BUSI 7230 From:Ben Whitlow, Ke Shang, Marc carrefour Date: [ 2/18/2012 ] Salem Data work is soon unprofitable. Flores is contemplating closing Salem Data Services (SDS). In attempting to determine SDSs future day profitability, we determined which expenses were variable star with respect to taxation hours. We concluded that hourly personnel contend were the simply pertinent variable cost (see Problem 2). Additionally, we did not consider the space expenses as relevant to our profitability sound judgment for SDS. These expenses were paid to the parent company, which is raw materialally r stock-stillue for Salem Telephone Company. Therefore, these costs were not applicable to the situation. With these assumptions, SDS currently has a can income of $(21,416.65) (see Problem 1). The smash-even point for these figures will be about 166 moneymaking(prenominal) hours, expect a 205 intracompany h our load. Additionally, utilize a sensitivity synopsis with elasticities of demand, we found that either increase or decreasing toll would have a banish effect on keep down contribution margin. Therefore, on our basic model, we assume that our pricing organize is ideal.

However, if we were to increase our revenue hours by 30% using advertising, we whitethorn be able to break even given that the cost of additional advertising does not exceed $11,703.35. In conclusion, we cause SDS to be a problem for Salem Telephone Company; however, we deduce that this problem could only be temporary as it appear s that demand for SDS has been on a steady r! ise everyplace the last few months. Our analysis reveals that increasing promotion expenses to get together more business could be a strategic hit for SDS, especially their short-run profitability. If commercial demand were to rise slightly 28 hours, SDS could break even and then begin earning profits.If you destiny to get a effective essay, order it on our website: OrderCustomPaper.com

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