PharoahHorticulture provides and maintains live plants in office buildings. The company's916customers are charged $32per month for this service, which includes weekly watering visits. The variable cost to service a customer's location is $19per month. The company incurs $2,490each month to maintain its fleet of four service vans and $3,392each month in salaries.Pharoahpays a bookkeeping service $2per customer each month to handle all invoicing and accounting functions.

(a)

PreparePharoah's contribution format income statement for the month.

Per Unit

select an income statement item

Operating Income

Variable Expenses

Service Expense

Total Variable Expenses

Sales Revenue

Salaries Expense

Contribution Margin

Fixed Expenses

Vans Expense

Total Fixed Expenses

Bookkeeping Expense

$

enter a dollar amount

$

enter a dollar amount

select an opening section name

Variable Expenses

Vans Expense

Salaries Expense

Sales Revenue

Total Variable Expenses

Service Expense

Total Fixed Expenses

Contribution Margin

Fixed Expenses

Operating Income

Bookkeeping Expense

:select an income statement item

Sales Revenue

Operating Income

Contribution Margin

Service Expense

Salaries Expense

Vans Expense

Variable Expenses

Total Fixed Expenses

Fixed Expenses

Bookkeeping Expense

Total Variable Expenses

$

enter a dollar amount

enter a dollar amount

select an income statement item

Contribution Margin

Operating Income

Total Variable Expenses

Bookkeeping Expense

Sales Revenue

Vans Expense

Variable Expenses

Fixed Expenses

Service Expense

Total Fixed Expenses

Salaries Expense

enter a dollar amount

enter a dollar amount

select a closing section name

Total Variable Expenses

Sales Revenue

Contribution Margin

Operating Income

Total Fixed Expenses

Service Expense

Fixed Expenses

Bookkeeping Expense

Variable Expenses

Vans Expense

Salaries Expense

enter a total amount for section one

enter a total amount per unit for section one

select a summarizing line for the first part

Total Variable Expenses

Variable Expenses

Vans Expense

Contribution Margin

Sales Revenue

Bookkeeping Expense

Service Expense

Salaries Expense

Operating Income

Total Fixed Expenses

Fixed Expenses

enter a total amount for the first part

$

enter a total amount per unit for the first part

select an opening name for section two

Bookkeeping Expense

Salaries Expense

Variable Expenses

Sales Revenue

Vans Expense

Fixed Expenses

Contribution Margin

Total Fixed Expenses

Service Expense

Operating Income

Total Variable Expenses

select an income statement item

Service Expense

Sales Revenue

Operating Income

Total Variable Expenses

Bookkeeping Expense

Salaries Expense

Variable Expenses

Fixed Expenses

Total Fixed Expenses

Vans Expense

Contribution Margin

enter a dollar amount

select an income statement item

Service Expense

Sales Revenue

Bookkeeping Expense

Total Variable Expenses

Vans Expense

Variable Expenses

Contribution Margin

Total Fixed Expenses

Salaries Expense

Operating Income

Fixed Expenses

enter a dollar amount

select a closing name for section two

Vans Expense

Fixed Expenses

Variable Expenses

Bookkeeping Expense

Operating Income

Sales Revenue

Total Variable Expenses

Salaries Expense

Service Expense

Contribution Margin

Total Fixed Expenses

enter a total amount for section two

select a closing name for this statement

Service Expense

Salaries Expense

Bookkeeping Expense

Variable Expenses

Total Variable Expenses

Total Fixed Expenses

Fixed Expenses

Operating Income

Vans Expense

Sales Revenue

Contribution Margin

$

enter a total amount for this statement

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(b)

What is the expected monthly operating income if190customers are added?

Operating income$

enter the operating income amount in dollars

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(c)

Mr.Pharoahis exploring options to reduce theannualbookkeeping costs.

Option 1:Renegotiate the current contract with the bookkeeping service to pay a flat fee of $10,212per year plus $1per customer per month.Option 2:Hire a part-time bookkeeper for $18,428per year to handle the invoicing and simple accounting. He would need to pay $6,700per year to have taxes and year-end financial statements prepared.

Compare the current bookkeeping cost with the two options at customer levels of916,1,936, and1,972.

916

1,936

1,972

Current cost$

enter a dollar amount

$

enter a dollar amount

$

enter a dollar amount

Option 1$

enter a dollar amount

$

enter a dollar amount

$

enter a dollar amount

Option 2$

enter a dollar amount

$

enter a dollar amount

$

enter a dollar amount