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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

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)

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