Prestige Telephone Company BY mtssnik2362 Scott Johnson, Nicole Phillips, Ashton Shuler, & Brandy Watts February 25th, 2014 Group Contributions Responded to all texts, discussion boards, and emails Participated in online chat and conference call Answered question 3 Provided the framework of how the case would be set up Suggested new ideas for later projects on how to discuss our topic Answered question 2 Set up a conference call, but we could not all attend, so we decided on a later time Came up with the idea we all should write a short conclusion for each question to make it easier to write a bigger one at the end of the case
Answered question 4 Formatted the case into the format needed Set up the FaceBook message we used to check in with each other and share ideas Answered question 1 Set up a conference call where we confirmed what question each person would answer Made sure everyone was up to speed on what the individual expectations of the group would be QUESTIONS 1 . ) Appraise the results of operations of Prestige Data Services. Is the subsidiary really a problem to Prestige Telephone Company?
Consider carefully the differences between reported costs and costs relevant for decisions that Daniel Rowe is onsidering. In deciding whether Prestige Data Services is a problem to Prestige Telephone Company, we must look at the benetl ts and costs that are associated with company as a whole and as separate functioning parts. While the subsidiary looks to show a loss while standing on its own, it was initially created to provide services to the parent company.
The benefits that it provides to the parent company allow them to operate at a lower cost of service. When we look at the shared costs that the data company and the telephone company have (accounting, payroll, etc) we have to emember that if the data company was not there, the costs of the shared services would be completely associated to the telephone company. Also, the services that the data company provides are at a much lower cost to the telephone company.
It is hard to look at the activities in the two companies separately because they are dependent upon one another for services and that is why the subsidiary was created initially. Prestige Data Services allows Prestige Telephone Services to reduce their costs in two ways – shared expenses and reduced supply chain costs. From this point of view, the ubsidiary is not a problem for the parent company; it is a benefit to them. 2. ) Assuming the company demand for service will average 205 hours per month, what level of commercial sales of computer use would be necessary to break even each month?