Crane Horticulture provides and maintains live plants in office buildings. The companys 872 customers are charged $37 per month for this service, which includes weekly watering visits. The variable cost to service a customers location is $17 per month. The company incurs $2,034 each month to maintain its fleet of four service vans and $3,300 each month in salaries. Crane pays a bookkeeping service $2 per customer each month to handle all invoicing and accounting functions.

1) What is the expected monthly operating income if 236 customers are added?

Operating income

$

2) Mr. Crane is exploring options to reduce the annual bookkeeping costs.

Option 1:	Renegotiate the current contract with the bookkeeping service to pay a flat fee of $10,479 per year plus $1 per customer per month.
Option 2:	Hire a part-time bookkeeper for $19,178 per year to handle the invoicing and simple accounting. He would need to pay $6,200 per year to have taxes and year-end financial statements prepared.

Compare the current bookkeeping cost with the two options at customer levels of 872, 1,944, and 1,984.

872 1944 1984

Current cost		$	$	$
Option 1		$	$	$
Option 2		$	$	$