SecD Group6 Prestige

Prestige Telephone Co.
Harvard Business School Case #197-097

Case Software #XLS030
Copyright © 2010 President and Fellows of Harvard College. No part of this product may be reproduced, stored in a retrieva
in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without the permission of Harvar
e reproduced, stored in a retrieval system or transmitted
—without the permission of Harvard Business School.
Exhibit 1 Prestige Data Services Summary of Computer
Utilization, First Quarter 2003
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
Exhibit 2 Prestige Data Services Summary Results of Operations, First Quarter 2003
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)
S. No. Group06
1 Sujata Kothavade
2 Kriti Nagori
3 Faizan Ahmad
4 Nasreen Rahat
5 Nidhi Agarwal
6 Tushar Chugh
If company buys services from outside (using march data)
Cost 178400
License cost 1995000
Total expense 2173400
If Prestige Telephone Company shuts down its subsidiary company, It will have to incur an extra cost of $2173400
Therefore the company shouldn’t shut down the subsidiary company and give it some time to grow.
ur an extra cost of $2173400
e time to grow.
Jan Feb March
Total Hours available 536 536 568
Intracompany hours 205 205 205
Revenue Intracompany 82000 82000 82000
Total cost 231513 229925 233723
Extra cost to be covered 149513 147925 151723
Breakeven Per hour sales 186.8913 184.9063 189.6538
Revenues Revenue Hours Jan
Intercompany 82400 72400 89200 Intercompany 206
Commercial Commercial 123
Computer Use 98400 108000 110400 Total 329
Other 9241 9184 12685 Service Hours 32
Total 190041 189584 212285 Available 175
A C
Hourly Use cost 1000 Hourly Use 800
Revenue Hours Jan Feb Mar Revenue Hours Jan

Commercial 86.1 94.5 96.6 Commercial 159.9
Computer Use 86100 94500 96600

Decrease in profit -12300 -13500 -13800 Computer Use 127920
Other 9241
B 137161
Hourly Use cost 600 Due to promotion 178309.3
Intercompany 82400
Revenue Hours Jan Feb Mar Total Revenue 260709.3
Commercial 159.9 175.5 179.4 Total Expense 231513
Promotion Cost 29196.3
Computer Use 95940 105300 107640
Decrease in profit -2460 -2700 -2760 D Using March data
Reduced hours 110.4
Total contribution 88320
Feb Mar
181 223
135 138
316 361
32 40
188 167
Feb Mar
175.5 179.4
140400 143520
9184 12685
149584 156205
194459.2 203066.5
72400 89200
266859.2 292266.5
229925 233723
36934.2 58543.5
Using March data

110.4
88320
Suggestions
1 Instead of usng standalone statements for the parent company and the subsidiary company, Prestige Telephone
financial statements for the parent and subsidiaries since these statements will show the actual contributio
2 Certain costs of Prestige Data benefit the Prestige Telephone Company but they are only being considered as expen
that how these services are helping PTC earn revenue. So, to make decisions PDS should consider the variable costs
ompany, Prestige Telephone Company should use consolidated
ll show the actual contribution of PDS to PTC's Revenues.
ly being considered as expenses to PDS and it is not considered

d consider the variable costs and not just the reported costs.

SecD Group6 Prestige

Uploaded by

Copyright:

Available Formats

SecD Group6 Prestige

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

SecD Group6 Prestige

Uploaded by

Copyright:

Available Formats

Prestige Telephone Co.

Harvard Business School Case #197-097

Revenue Hours January February March

Intercompany 206 181 223

January February March

Revenue Hours Jan Feb Mar Revenue Hours Jan

Computer Use 86100 94500 96600

Using March data

ly being considered as expenses to PDS and it is not considered

You might also like