Solution-Estimate the effect on income of each of the

Estimate the effect on income of each of the options rowe

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Reference no: EM131756349

Question: Estimate the effect on income of each of the options Rowe has suggested if Bradley estimates as follows:

A. Increasing the price to commercial customers to $1,000 per hour would reduce demand by 30%.

B. Reducing the price to commercial customers to $600 per hour would increase demand by 30%.

C. Increased promotion would increase sales by up to 30%. Bradley is unsure how much promotion this would take. (How much could be spent and still leave Prestige Data Services with no reported loss each month if commercial hours were increased 30%?)

D. Reducing operations to 16 hours on weekdays, rather than 24 hours, and eight hours on Saturdays would result in a loss of 20% of commercial revenue hours.

Revenue Hours	January	February	March
Intercompany	206	181	223
Commercial	123	135	138
Total revenue hours	329	316	361
Service hours	32	32	40
Available hours	223	164	143
Total hours	584	512	544

	January	February	March
Revenues
Intercompany sales	$82,400	$72,400	$89,200
Commercial sales
Computer use	98,400	108,000	110,400
Other	9,241	9,184	12,685
Total revenue	$190,041	$189,584	$212,285
Expenses
Space costs:
Rent	$8,000	$8,000	$8,000
Custodial services	1,240	1,240	1,240
	9,240	9,240	9,240
Equipment costs
Computer leases	95,000	95,000	95,000
Maintenance	5,400	5,400	5,400
Depreciation:
Computer equipment	25,500	25,500	25,500
Office equipment and fixtures	680	680	680
Power	1,633	1,592	1,803
	128,213	128,172	128,383
Wages and salaries
Operations	29,496	29,184	30,264
Systems development and maintenance	12,000	12,000	12,000
Administration	9,000	9,000	9,000
Sales	11,200	11,200	11,200
	61,696	61,384	62,464/
Materials	9,031	8,731	10,317
Sales promotions	7,909	7,039	8,083
Corporate services	15,424	15,359	15,236
Total expenses	$231,513	$229,925	$233,723
Net income (loss)	$(41,472)	$(40,341)	$(21,438)

Reference no: EM131756349

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Estimate the effect on income of each of the options rowe

Reference no: EM131756349

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