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Document 3
Document 3
Document 3
Question 2)
cost per revenue hour = amount of variable expense/ total number of revenue hours
For the non-variable expenses, we could add up Rent ($8,000), Custodial services ($1,240), Computer
leases ($95,000), Maintenance ($5,400), Depreciation of Computer equipment ($25,500) ; Office
equipment and fixtures ($680), Operations: salaried staff ($21,600), Systems development and
maintenance ($12,000), Administration ($9,000), Sales ($11,200) Sales promotion ($8,083) and
corporate services ($15,236) which would total $212,939
Question 3)
Breakeven Hours =
(Total Fixed Costs) - (Allowed Costs after Variable Costs of Intercompany Operations) / Contribution per
Hour
Question 5)
1. The demand reduces by 30% so you will have 96,6 (rounding up 97) of commercial revenue
hours . The fixed costs stay the same so we have to look at the total contribution:
138 revenue hours: 138 x ( price – variable cost) = 138 x (800 – 28,7) = 106 439,4
2. The demand goes up by 30% so you will have 179,4 (rounding down 179) commercial revenue
hours.
No reported loss means that we should at least be breaking even. We already calculated that we
need 177,4 commercial revenue hours to break even.
contribution : 177,4 x (800-28,7) = 136 828,62
So the extra amount that we can spend for the extra promotion is 1 234,08 ( 138 062,7 – 136
828,62)
Question 6)