Zion Pool Cleaning Service Income Statement For the Month Ended July 31, 2016 Becker Meech Farwood Total Service Revenue $4,000 $3,500 $3,000 $10,500 Variable Costs 2,000 1,400 2,100 5,500 Contribution Margin 2,000 2,100 900 5,000 Fixed Costs 3,500 Operating Income $1,500

Zion Pool Cleaning Service provides pool cleaning services to residential customers. The company has three employees, each assigned to specific customers. The company considers each employee's territory as a business segment. The company incurs variable costs that include the employees' wages, pool chemicals, and gas for the service vans. Fixed costs include depreciation on the service vans. Following is the income statement for the month of July:

.Requirement 1. Calculate the contribution margin ratio for each business segment.

		/		=	Contribution margin ratio
Becker		/		=		%
Meech		/		=		%
Farwood		/		=		%

Requirement 2. The business segments had the following numbers of customers: Becker, 80; Meech, 70; and Farwood, 60. Compute the service revenue percustomer, variable cost per customer, and contribution margin per customer for each business segment.

	Service revenue	Variable costs	Contribution margin
	per customer	per customer	per customer
Becker
Meech
Farwood

Requirement 3. Which business segment was most profitable? List some possible reasons why this segment was most profitable. How might the various reasons affect the company in the long term?

The

Meech Farwood Becker business segment was the most profitable because the

contribution margin per customer was the lowest.

revenue per customer was the highest.

revenue per customer was the lowest.

variable cost per customer was the highest.

variable cost per customer was the lowest.

Possible reasons for the profitability of this business segment include the following: (Select all that apply.)

A.

Lower revenue per customer in the most profitable business segment

B.

Reducing the amount of pool chemicals used in service calls for the most profitable business segment

C.

Better routes with shorter drive times allowing more customers to be served in the most profitable business segment

D.

Higher employee wages in the most profitable business segment

E.

Lower employee wages in the most profitable business segment

F.

Higher revenue per customer in the most profitable business segment

G.

Lengthy routes with longer drive times allowing fewer customers to be served in the most profitable business segment

H.

Employees in the most profitable business segment cutting corners when performing service calls

How might the various reasons affect the company in the long term?

The possible side effects of the items identified in the preceding step could be (Select all that apply.)

A.

increased employee turnover because of low wages.

B.

dissatisfied customers because of inadequate service.

C.

increased service costs because of reduced pool chemical usage causing poor water quality and additional service calls.

D.

less fuel and maintenance costs because of lengthier routes.

E.

less fuel and maintenance costs because of efficient routes.

F.

highly compensated employees resulting in an increase in contribution margin.

G.

increased customer base due to competitive service prices.