90.2K

Verified Solution

Link Copied!

Exhibit 1 Prestige Data Services Summary of Computer Utilization, First Quarter 2003 Exhibit 2 Prestige Data Services Summarv Results of Operations. First Ouarter 2003 2. In Exhibit 2, for each line item under expenses, classify the expense as Fixed (F) if it is entirely fixed or semi-variable (SV) otherwise. (1 point) 3. In Exhibit 2, for each line item under expenses that you classified as semi-variable, use the high-low method with total revenue hours (intercompany + commercial) as the cost driver to determine the fixed expense and the variable cost per revenue hour. What are the total monthly fixed costs for Prestige Data Services and what is the total variable cost per revenue hour? (Note: When computing total fixed cost, remember to also include costs that were classified as Fixed in question 2.) (2 points) 4. For each line item under expenses that is classified as semi-variable, use simple regression analysis with total revenue hours as the cost driver to determine the fixed expense and the variable cost per revenue hour. What are the total monthly fixed costs for Prestige Data Services and what is the total variable cost per revenue hour? (Note: When computing total fixed cost, remember to also include costs that were classified as Fixed in question 2.) (2 points) 5. Based on the estimated fixed and variable costs using each method, what level of commercial sales of computer use would be necessary for the subsidiary to break even (i.e. earn zero profits) each month? In answering this question, assume parent demand for services is 205 hours per month and the parent company is billed at $400 per hour. Ignore "Commercial Sales: Other" revenue (i.e., assume it is zero). (Hint: The breakeven commercial sales is the level of commercial sales at which the sum of contribution from sales to parent company and commercial sales covers total fixed costs.) (2 points)

Answer & Explanation Solved by verified expert

See Answer