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Prestige

In: Business and Management

Submitted By nimmi
Words 667
Pages 3
Introduction

* Pestige Data Services (PDS) was a subsidiary of PrestigeTelephone (PT) Company.PDS -Data processing for the telephone companies & soldcomputer services to other companies. * Yet to experience profit. * Manager -More time required for business to become profitable. * President -Reduce the drain in company resources.

Objectives

* Analyze the results of operations. * Understand the economics of a business. * Forecast the potential change in income with each alternativesolution. * Understand cost information reporting.

Issues

* To continue or stop Prestige Data Services operation or separate as stand-alone entity from parent company since it isnot generating profit. * Consider changes in pricing or promotion that might improve profitability. * Reduce company resources wastage if any. * Reduce service hour from 24 hour to 2 shift per day.

Question1 Solution

* Non-cancelable leases on computer equipment havefour more years to run. * If Prestige shuts down the subsidiary it needs tooutsource data services from an outside vendor almost double the cost to present system. * Add back the depreciation (non-cash) the net lossconvert into profit in the month of March. * $800 per hour is acceptable price. * Opportunity costs rather than reported or historicalcosts should be used. And Prestige Data Services isnot really a problem to Prestige Telephone Co. * Reported cost includes total cost i.e. variable costand fixed cost. But in decision making only variablecost will be considered.

* Reported Costs $160413 * Relevant Costs $61860

Question 2 Solution

Break Even Point-Total Cost = Total Revenue

January February March
231513-82000 229925-82000 233723-82000
$800 $800 $800
= 187 hours =185 hours =163hours

Question 3 Solution
a)…...

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