Hello.

I am working through this accounting problem that explores contribution margins, identifying fixed costs on a sheet, and break even points. would you look at the following question 3 and 4 to help explain the process to solve?

Thank you.

3. Create a contribution margin income statement for Salem Data Services. Assume that intra- company usage is 205 hours. Assume commercial usage is at the March level. 4. Assuming the intracompany demand for service will average 205 hours per month, what level of commercial revenue hours of computer use would be necessary to break even each month? Exhibit 1 Salem Data Services Summary of Computer Utilization, First Quarter 2004 January February March Number of weekdays (M-F) X 24 hours per day 22 528 20 480 23 552 Number of Saturdays X 8 hours per day 5 40 4 32 4 32 568 Total hours available for revenue 512 584 Revenue hours Intracompany Commercial Total revenue hours 206 123 181 135 223 138 361 329 316 239 196 223 Hours available to sell Source: Casewriter. Exhibit 2 Salem Data Services Summary Results of Operations, First Quarter 2004 January February March Revenues Intracompany sales Commercial sales Total revenue $82,400 98,400 $180,800 $72,400 108,000 $180,400 $89,200 110,400 $199,600 Expenses Space costs: Rent Custodial services $8,000 1,240 9,240 $8,000 1,240 9,240 $8,000 1,240 9,240 95,000 5,400 95,000 5,400 95,000 5,400 Equipment costs Computer leases Maintenance Depreciation: Computer equipment Office equipment and fixtures Power 25,500 680 1,546 128, 126 25,500 680 1,485 128,065 25,500 680 1,697 128,277 Wages and salaries Operations: salaried staff Operations: hourly personnel Systems development and maintenance Administration Sales 21,600 7,896 12,000 9,000 11200 61,696 21,600 7,584 12,000 9,000 11,200 61,384 21,600 8,664 12,000 9,000 11,200 62,464 Sales promotion Corporate services Total expenses 7,909 15,424 $222,395 7,039 15.359 $221,087 8,083 15.236 $223,300 Net income (loss) $(41,595) S(40,687) $(23,700) Source: Casewriter