Henley Horticulture provides and maintains live plants in office buildings. The companys 850 customers are charged $30 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 $2,000 each month to maintain its fleet of four service vans and $3,000 each month in salaries. Henley pays a bookkeeping service $2 per customer each month to handle all invoicing and accounting functions.

A. Prepare Henley's contribution format income for the month. Table must include operating Income, fixed expenses, service expense, contribution margin, vans expense, salaries expense, sales revenue,variable expenses, total variable expenses, total fixed expenses, book keeping expense.

B. What is the expected monthly operating income if 150 customers are added?

Next, Mr. Henley 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 $10,200 per year plus $1 per customer per month. Option 2: Hire a part-time bookkeeper for $18,000 per year to handle the invoicing and simple accounting. He would need to pay $5,000 per year to have taxes and year-end financial statements prepared.

C. Compare the current annual bookkeeping cost with the two options at customer levels of 850, 1,000, and 1,100.

D. Besides the bookkeeping costs incurred, what should Mr. Henley consider before he makes a change in bookkeeping services?

	850	1000	1100
Current Cost
Option 1
Option 2