Oriole Horticulture provides and maintains live plants in office buildings. The companys 938 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 $2,490 each month to maintain its fleet of four service vans and $3,136 each month in salaries. Oriole pays a bookkeeping service $2 per customer each month to handle all invoicing and accounting functions.

What is the expected monthly operating income if 250 customers are added?

Operating income

$_________

Mr. Oriole 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 $10,248 per year plus $1 per customer per month.
Option 2:	Hire a part-time bookkeeper for $19,388 per year to handle the invoicing and simple accounting. He would need to pay $5,300 per year to have taxes and year-end financial statements prepared.

Compare the current bookkeeping cost with the two options at customer levels of 938, 1,120, and 1,200.

		938	1,120	1,200
Current cost		$________	$_________	$________
Option 1		$_________	$________	$________
Option 2		$________	$________	$________

$ $ Total Variable Expenses Variable Expenses Operating Income Sales Revenue Fixed Expenses Vans Expense Bookkeeping Expense Contribution Margin Salaries Expense Service Expense Total Fixed Expenses $ $ 4 4 $