Exercise 13-37 Prepare Budgeted Financial Statements (LO 13-6) Varmit-B-Gone is a pest control service that operates in a suburban neighborhood. The company attempts to make service calls at least once a month to all homes that subscribe to its service. It makes more frequent calls during the summer. The number of subscribers also varies with the season. The number of subscribers and the average number of calls to each subscriber for the months of Interest follow: K Subscribers 600 700 1,400 1,600 1,600 1,500 March April May June July August Service calls (per subscriber) 0.6 0.9 1.5 2.5 ces 3.0 2.4 The average price charged for a service call is $80. Of the service calls, 30 percent are paid in the month the service is rendered, 60 percent in the month after the service is rendered, and 8 percent in the second month after. The remaining 2 percent is uncollectible. Varmit-B-Gone estimates that the number of subscribers in September should fall 10 percent below August levels, and the number of service calls per subscriber should decrease by an estimated 20 percent. The following information is available for costs incurred in August. All costs except depreciation are paid in cash. $ 24,000 22,000 42,000 $ 88,000 Service costs Variable costs Maintenance and repair Depreciation (fixed) Total Marketing and administrative costs Marketing (variable) Administrative (fixed) Total Total costs $ 14,500 55.000 $ 69,500 $157,500 Variable service and marketing costs change with volume. Fixed depreciation will remain the same, but fixed administrative costs will Incroace hnarrent herinninn Contemher 1 Maintenance and renair are nravirler hurontract which alle for a 1 narront increace in Help The average price charged for a service call is $80. Of the service calls, 30 percent are paid in the month the service is rendered, 60 percent in the month after the service is rendered, and 8 percent in the second month after. The remaining 2 percent is uncollectible. Varmit-B-Gone estimates that the number of subscribers in September should fall 10 percent below August levels, and the number of service calls per subscriber should decrease by an estimated 20 percent. The following information is available for costs incurred in August. All costs except depreciation are paid in cash. Service coste Variable costs Maintenance and repair Depreciation (fixed) Total Marketing and administrative costa Marketing (variable) Administrative (fixed) Total Total costa $ 24,000 22,000 42,000 S88,000 $ 14,500 55,000 $ 69,500 $157,500 Variable service and marketing costs change with volume. Fixed depreciation will remain the same, but fixed administrative costs will ncrease by 5 percent beginning September 1. Maintenance and repair are provided by contract, which calls for a 1 percent increase in September Required: Prepare a budgeted income statement for September. (Do not round intermediate calculations.) VARMIT-B-GONE Budgeted Income Statement For the Month of September TOTAL costs $157,500 Variable service and marketing costs change with volume. Fixed depreciation will remain the same, but fixed administrative costs will Increase by 5 percent beginning September 1. Maintenance and repair are provided by contract, which calls for a 1 percent increase in September Required: Prepare a budgeted income statement for September. (Do not round Intermediate calculations.) VARMIT-B-GONE Budgeted Income Statement For the Month of September Service costs: Total service costs Marketing and administrative: Total marketing and administrative costs Total costs
