Case Study Example | Topics and Well Written Essays - 1000 words - 19

Case Study Example The common thing about the fixed expenditures is that they are fixed throughout the three months. Based on the above analysis, Salem Data Services is a big challenge for Salem Telephone Company. There are a number of facts that can be used to prove this assertion. One of the most visible fact is seen in Salem Data Services contribution margin income statement. The Contribution margin income statement for Salem Data Services proves that the net income is by far negative and cannot be easily turned into profits. The loss incurred through the provision of these services is far high that it cannot be turned around by simply adding or reducing customer prices. Even with the 30% increase in demand here will be minimal effect on the actual income that the company gets from these operations. The same applies to increased prices. In fact, increased prices will even make things worse because they will have lower demand as compared to what they were having at the time when this report was made. However, if they increase his prices, then they might be able to get higher per unit profit on t his service. This would not be advisable because they will o be able to raise enough money to cater for their costs. This will only imply at the end of the day they will still incur losses. If the prices are lower than they will definitely have more people demanding for their services. However, the problem assisted to lower prices is the decrease in per unit income. When the per unit income for service provision is low the company will incur losses at the end of the day. This is because the total income earned is less than the cost of producing the service. Therefore, he only thing that the company can do is trying to lower their production costs. Not all the expenses are flexible. However, the company could look at the expenses with high flexibility and adjust them