Salem Cable Installation Services, Inc. is planning to open a new regional office. Based on a market survey Salem commissioned, the company expects services demand for the new office to be between 30,000 and 40,000 hours annually. The firm normally charges customers $30 per hour for its installation services. Salem expects the new office to have a standard variable cost of $16 per hour and standard fixed cost of $430,000 per year.
Required
a. Develop flexible budgets based on 30,000 hours, 35,000 hours, and 40,000 hours of services.
b. Based on the results for Requirement a, comment on the likely success of Salem's new office.