Classic Limo, Inc., provides limousine service to Tri-Cities airport. The price of the service is fixed at a flat rate for each trip and most costs of providing service are stable for each trip. Marc Pence, the owner, budgets income by estimating two factors that fluctuate with the economy: the fuel cost associated with each trip and the number of customers who will take trips. Looking at next year, Marc develops the following estimates of contribution margin (price less variable cost of the trip, including fuel) and for the estimated number of customers. Although Marc understands that it is not strictly true, he assumes that the cost of fuel and the number of customers are independent.

	Contribution Margin per Ride
Scenario	(Price Variable cost)			Number of Customers
Excellent		$55		4,900
Fair		30		3,800
Poor		15		1,500

In addition to the costs of a ride, Marc estimates that other service costs are $40,000 plus $6 for each customer (ride) in excess of 3,800 rides. Annual administrative and marketing costs are estimated to be $21,000 plus 10 percent of the contribution margin.

Required:

Prepare an analysis of the possible operating income for Classic Limo, Inc., similar to that in Exhibit 13.15. What is the range of possible operating incomes?

can you further explain how the service cost changes for the last three of the column & the rest of the chart. please and thank you!

	Contribution Margin	Number of Customers	Total Contribution Margin	Service Costs	Marketing & Admin	Operating Profit (Loss)
Poor	$15	1,500	$22,500	$40,000		$(17,500)
Fair	$30	1,500	$45,000			$45,000
Excellent	$55	1,500	$82,500			$82,500
Poor	$15	3,800	$57,000			$57,000
Fair	$30	3,800	$114,000			$114,000
Excellent	$55	3,800	$209,000			$209,000
Poor	$15	4,900	$73,500			$73,500
Fair	$30	4,900	$147,000			$147,000
Excellent	$55	4,900	$269,500			$269,500