Sunland Horticulture provides and maintains live plants in office buildings. The companys 896 customers are charged $37 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 $2,294 each month to maintain its fleet of four service vans and $3,124 each month in salaries. Sunland pays a bookkeeping service $2 per customer each month to handle all invoicing and accounting functions.

(a)

• Your Answer
• Correct Answer (Used)

Correct answer icon

Your answer is correct.

Prepare Sunlands contribution format income statement for the month.

						Per Unit
select an income statement item Sales RevenueTotal Variable ExpensesFixed ExpensesVariable ExpensesService ExpenseContribution MarginBookkeeping ExpenseVans ExpenseOperating IncomeSalaries ExpenseTotal Fixed Expenses				$enter a dollar amount		$enter a dollar amount
select an opening section name Fixed ExpensesSales RevenueTotal Fixed ExpensesService ExpenseContribution MarginBookkeeping ExpenseTotal Variable ExpensesVariable ExpensesSalaries ExpenseVans ExpenseOperating Income:
select an income statement item Bookkeeping ExpenseSales RevenueOperating IncomeContribution MarginTotal Fixed ExpensesVariable ExpensesSalaries ExpenseVans ExpenseTotal Variable ExpensesService ExpenseFixed Expenses		$enter a dollar amount				enter a dollar amount
select an income statement item Vans ExpenseSales RevenueOperating IncomeVariable ExpensesService ExpenseTotal Variable ExpensesSalaries ExpenseBookkeeping ExpenseFixed ExpensesTotal Fixed ExpensesContribution Margin		enter a dollar amount				enter a dollar amount
select a closing section name Vans ExpenseSales RevenueOperating IncomeVariable ExpensesContribution MarginTotal Variable ExpensesFixed ExpensesService ExpenseTotal Fixed ExpensesBookkeeping ExpenseSalaries 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 Fixed ExpensesContribution MarginBookkeeping ExpenseTotal Fixed ExpensesService ExpenseTotal Variable ExpensesVariable ExpensesOperating IncomeVans ExpenseSalaries ExpenseSales Revenue				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 RevenueBookkeeping ExpenseVariable ExpensesTotal Fixed ExpensesOperating IncomeTotal Variable ExpensesSalaries ExpenseVans ExpenseContribution MarginService ExpenseFixed Expenses
select an income statement item Bookkeeping ExpenseVariable ExpensesTotal Variable ExpensesService ExpenseSalaries ExpenseFixed ExpensesContribution MarginVans ExpenseTotal Fixed ExpensesSales RevenueOperating Income		enter a dollar amount
select an income statement item Salaries ExpenseTotal Variable ExpensesOperating IncomeTotal Fixed ExpensesBookkeeping ExpenseVariable ExpensesVans ExpenseFixed ExpensesService ExpenseContribution MarginSales Revenue		enter a dollar amount
select a closing name for section two Bookkeeping ExpenseSales RevenueVariable ExpensesService ExpenseContribution MarginTotal Fixed ExpensesVans ExpenseTotal Variable ExpensesFixed ExpensesSalaries ExpenseOperating Income				enter a total amount for section two
select a closing name for this statement Contribution MarginSales RevenueOperating IncomeSalaries ExpenseService ExpenseTotal Fixed ExpensesTotal Variable ExpensesVans ExpenseVariable ExpensesBookkeeping ExpenseFixed Expenses				$enter a total amount for this statement

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Attempts: 3 of 3 used

(b)

• Your Answer
• Correct Answer (Used)

What is the expected monthly operating income if 170 customers are added?

Operating income

$enter the operating income amount in dollars

(c)

New attempt is in progress. Some of the new entries may impact the last attempt grading.

Your answer is partially correct.

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 $10,359 per year plus $1 per customer per month.
Option 2:	Hire a part-time bookkeeper for $19,588 per year to handle the invoicing and simple accounting. He would need to pay $6,900 per year to have taxes and year-end financial statements prepared.

Compare the current bookkeeping cost with the two options at customer levels of 896, 1,408, and 1,420.

		896	1,408	1,420
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