Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lamphere Lawn Care provides lawn and gardening services. The price of the service is fixed at a flat rate for each service, and most

image text in transcribed

Lamphere Lawn Care provides lawn and gardening services. The price of the service is fixed at a flat rate for each service, and most costs of providing the service are the same, given the similarity in the lawns and lots. The owner budgets income by estimating two factors that fluctuate with the economy: the contribution margin associated with each service call and the number of customers who will request lawn service. Looking at next year, the owner develops the following estimates of contribution margin (price less variable cost of the service, including labor) and the estimated number of service calls. Although the owner understands that it is not strictly true, the owner assumes that the cost of fuel and the number of customers are independent. Contribution Margin per Service Call Scenario Excellent Fair Poor (Price - Variable cost) $ 35 25 12 Number of Service Calls 10,550 8,100 5,800 In addition to the variable costs of service, the owner estimates that other costs are $55,000 plus $8 for each service call in excess of 4,200 calls. Annual administrative and marketing costs are estimated to be $37,000 plus 10 percent of the contribution margin. Required: Use a spreadsheet to prepare an analysis of the possible operating income for Lamphere Lawn Care similar to that in Exhibit 13.16. What is the range of possible operating incomes? Contribution Margin Per Number of Service Calls Service Call Total Contribution Margin Other Costs Marketing and Administrative Operating Profit (Loss) Excellent $ 35 10,550 Fair $ 25 10,550 Poor $ 12 10,550 Excellent $ 35 8,100 Fair $ 25 8,100 Poor $ 12 8,100 Excellent $ 35 5,800 Fair $ 25 5,800 Poor $ 12 5,800

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting an introduction to concepts, methods and uses

Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis

13th Edition

978-0538776080, 324651147, 538776080, 9780324651140, 978-0324789003

More Books

Students also viewed these Accounting questions