1. ?Revenue hours" represent the key activity that drives costs at Salem Data Services. Which expenses in Exhibit 2 are variable with respect to revenue hours? Which expenses are fixed with respect to revenue hours?
Expenses
Spase costs:
Rent Fixed cost1
Custodial services Fixed cost2
Equipment costs
Computer leases Fixed cost3
Maintenance Fixed cost4
Depreciation:
Computer equipment Fixed cost5
Office equipment and fixtures Fixed cost5
Power Variable cost6
Wages and salaries
Operations: salaried staff Fixed cost7
Operations: hourly personnel Variable cost8
Systems development and maintenance Fixed cost9
Administration Fixed cost10
Sales Fixed cost10
Sales promotion Fixed cost11
Corporate services Fixed cost11
1 The rent is a fixed cost because SDS has to pay the rent at Salem Telephone independent how many hours they are selling. That means even if SDS sell nothing the rent has to be paid.
2 The custodial services are fixed cost because they depend on Salem Telephone's estimated annual cost per square foot and so they are independent from the revenue of SDS.
3 The computer equipment is a fixed cost due to the fact that normally they were purchased before starts the business and so they are independent from the revenue.
4 The maintenance is a fixed cost because ad example the inventory has always to be controlled independe ...