Jana Morgan is about to sign up for cellular telephone service. She is primarily interested in the
Question:
Both plans are subject to a $25 activation fee and a $120 cancellation fee if the service is cancelled before one year. Janas brother will give her a cell phone that he no longer needs. It is not the latest version (and is not Internet capable) but will work well with both plans.
Required:
1. Classify the charges associated with the cellular phone service as (a) committed resources or (b) flexible resources.
2. Assume that Jana will use, on average, 45 minutes per month in local calling. For each plan, split her minute allotment into used and unused capacity. Which plan will be most cost effective? Why?
3. Assume that Jana loves her cell phone and ends up talking frequently with friends while traveling within her region. On average, she uses 60 local minutes a month and 30 regional minutes. For each plan, split her minute allotment into used and unused capacity. Which plan will be most cost effective? Why?
Step by Step Answer:
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen