Sunland Horticulture provides and maintains live plants in office buildings. The company's 950 customers are charged $40 per month for this service, which includes weekly watering visits. The variable cost to service a customer's location is $19 per month. The company incurs $2,254 each month to maintain its fleet of four service vans and $3,300 each month in salaries. Sunland pays a bookkeeping service $2 per customer each month to handle all invoicing and accounting functions.

(a)

Prepare Sunland's contribution format income statement for the month.

						Per Unit
select an income statement item Variable ExpensesVans ExpenseFixed ExpensesSales RevenueTotal Fixed ExpensesSalaries ExpenseOperating IncomeContribution MarginTotal Variable ExpensesBookkeeping ExpenseService Expense				$enter a dollar amount		$enter a dollar amount
select an opening section name Fixed ExpensesService ExpenseVariable ExpensesTotal Variable ExpensesContribution MarginVans ExpenseSales RevenueSalaries ExpenseTotal Fixed ExpensesOperating IncomeBookkeeping Expense:
select an income statement item Bookkeeping ExpenseOperating IncomeSalaries ExpenseVariable ExpensesService ExpenseContribution MarginTotal Variable ExpensesSales RevenueVans ExpenseFixed ExpensesTotal Fixed Expenses		$enter a dollar amount				enter a dollar amount
select an income statement item Variable ExpensesFixed ExpensesBookkeeping ExpenseOperating IncomeContribution MarginTotal Fixed ExpensesService ExpenseSalaries ExpenseVans ExpenseTotal Variable ExpensesSales Revenue		enter a dollar amount				enter a dollar amount
select a closing section name Total Fixed ExpensesVans ExpenseService ExpenseBookkeeping ExpenseSales RevenueTotal Variable ExpensesContribution MarginSalaries ExpenseOperating IncomeFixed ExpensesVariable Expenses				enter a total amount for section one		enter a total amount per unit for section one
select a summarizing line for the first part Operating IncomeTotal Variable ExpensesSales RevenueVans ExpenseTotal Fixed ExpensesVariable ExpensesBookkeeping ExpenseSalaries ExpenseFixed ExpensesService ExpenseContribution Margin				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 Sales RevenueContribution MarginFixed ExpensesService ExpenseSalaries ExpenseVariable ExpensesOperating IncomeVans ExpenseTotal Variable ExpensesTotal Fixed ExpensesBookkeeping Expense
select an income statement item Fixed ExpensesContribution MarginBookkeeping ExpenseOperating IncomeVariable ExpensesSales RevenueTotal Fixed ExpensesTotal Variable ExpensesService ExpenseSalaries ExpenseVans Expense		enter a dollar amount
select an income statement item Vans ExpenseSalaries ExpenseContribution MarginOperating IncomeBookkeeping ExpenseTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesSales RevenueService ExpenseFixed Expenses		enter a dollar amount
select a closing name for section two Variable ExpensesService ExpenseOperating IncomeTotal Variable ExpensesVans ExpenseSalaries ExpenseTotal Fixed ExpensesSales RevenueContribution MarginFixed ExpensesBookkeeping Expense				enter a total amount for section two
select a closing name for this statement Fixed ExpensesOperating IncomeBookkeeping ExpenseVariable ExpensesTotal Variable ExpensesTotal Fixed ExpensesSalaries ExpenseVans ExpenseContribution MarginSales RevenueService Expense				$enter a total amount for this statement

(b)

What is the expected monthly operating income if 198 customers are added?

Operating income

$enter the operating income amount in dollars

(c)

Mr. Sunland 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 $10,389 per year plus $1 per customer per month.
Option 2:	Hire a part-time bookkeeper for $19,596 per year to handle the invoicing and simple accounting. He would need to pay $6,600 per year to have taxes and year-end financial statements prepared.

Compare the current bookkeeping cost with the two options at customer levels of 950, 1,510, and 1,586.

		950	1,510	1,586
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