The only problem that I\'m having is the Variable cost, sales revenue and market

Question

The only problem that I'm having is the Variable cost, sales revenue and marketing(variable)

Exercise 13-37 Prepare Budgeted Financlal Statements (LO 13-6) Varmil-B-Gone is a pest control service that s in a suburban neighborhood. The company attempts to make service calls at least It makes more frequent calls during the summer The number of subscribers also and the average number of calls to each subscriber for the months of interest follow to all homes that to its service. varies with the season. The number of subscribers average nu 1,050 1,150 0.6 0.9 2,050 2.5 3.0 2,050 The average price charged for a service call is $80. Of the s percent in the month after the service is rendered, and 8 percent in the second ervice calls, 30 percent are paid in the month the service is rendered, 60 month after. The remaining 2 percent is uncollectible. Varmit-B-Gone estimatos that the number of subscribers in September should fall 10 percent below August levels, and the n service calls per subscriber should decrease by an estimated 20 August. All costs except depreciation are paid in cash. percent. The following information is available for costs incurred in ctri s 19,000 17.000 37.000 73,000 Depreciation (fxed) Total Marketing and administrative costs (variable) Administrative (fixed) 22,500 89,000 Total costs Variable service and marketing costs change with volume. Fixed depreci increase by 5 percent beginning September 1. Maintenance September ation will remain the same, but fixed administrative costs wil and repair are provided by contract, which calls for a 1 percent increase in Required Prepare a budgeted income statement for September. (Round intermediate calculations to 2 decimals places.)

Explanation / Answer

Budgeted income statement:

*Ratio of September to August volume:

September:(90%×2000)×(80%×2.4)=3,456

August:2000×2.4=4800

Ratio=3456/4800=.72

Sales revenue{(90%×2000)×(80%×2.4)×$80} $276,480 Service costs: Variable costs(19000×.72*) $13,680 Maintenance and repair(17000×1.01) $17,170 Depreciation (fixed) $37,000 Total service costs $67,850 Marketing and administrative: Marketing (variable)(22500×.72) $16,200 Administrative (fixed)(89000×1.05) $93,450 Total marketing and administrative costs $109,650 Total costs $177,500 Net operating income $98,9   

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