Varmit-B-Gone is a pest control service that operates in a suburban neighborhood

Question

Varmit-B-Gone is a pest control service that operates in a suburban neighborhood. The company attempts to make service calls at least once a month to all homes that subscribe to its service. It makes more frequent calls during the summer. The number of subscribers also varies with the season. The number of subscribers and the average number of calls to each subscriber for the months of interest follow May 2.550 The average price charged for a service call is $80. Of the service calls, 30 percent are paid in the month the service is rendered, 60 percent in the month after the service is rendered, and 8 percent in the second month after. The remaining 2 percent is uncollectible. Varmit-B-Gone estimates that the number of subscribers in September should fall 10 percent below August levels, and the number of service calls per subscriber should decrease by an estimated 20 percent. The following information is available for costs incurred in August. All costs except depreciation are paid in cash. s 14,000 51,000 5206,000 Variable service and marketing costs change with volume. Fixed depreciation will remain the same, but fixed administrative costs will increase by 5 percent beginning September 1. Maintenance and repair are provided by contract, which calls for a 1 percent increase Prepare a budgeted income statement for September. (Round intermediate calculations to 2 decimals places.) Budgeted Income Statement

Explanation / Answer

Varmit-B-Gone Budgeted Income Statement For the Month of September Hints Revenues $276,480 (90% x 2,000) x (80% x 2.4) x $80 Less: Service costs: ?Variable costs $10,080 (.72a x $14,000) ?Maintenance and repair        12,120 (1.01 x $12,000) ?Depreciation        32,000 (no change) Total service costs $54,200 Marketing and administrative: ?Marketing (variable)   $36,720 (.72a x $51,000) ?Administrative (fixed)   101,850 (1.05 x $97,000) Total marketing and administrative costs $138,570 Total costs $192,770 Operating profit $83,710 a Ratio of September to August volume: September: (90% x 2,000) x (80% x 2.4) = 3,456 August: 2,000 x 2.4 = 4,800 Ratio = .72 = 3,456 ÷ 4,800 ?or Ratio = .80 x .90 = .72

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.