Peter Flores , President of Salem Telephone Company , believes that the company 's Salem Data Services subsidiary is a potential growth opportunity , but the accounting reports he 's received suggest the subsidiary is a problem . Mr. Flores and Cynthia Wu , the manager of Salem Data Services , are assessing the situation and considering three options for moving forward . 1 ) Increase Salem Data Services ' price to commercial customers to $ 1,000 per hour , which is expected to reduce demand by 30 % . 2 ) Reduce Salem Data Services ' price to commercial customers to $ 600 per hour , which is expected to increase demand by 30 % . 3 ) Increase promotional spending to some amount where Salem Data Services ' revenue hours would be 30 % higher at the current hourly rate , but net profit ( loss ) will not differ from the current amount . Mr. Flores has hired you to write a one - page business memo detailing the following . Your opinion of whether Salem Data Services is a growth opportunity or a problem for Salem Telephone Company , and why . Your recommendation of which