Cornwall Mobile Detailing (CMD) is a service that washes and details a customer's vehicle at their home or office. It operates on a membership basis. Members pay $1,900 dues per month, which entitle them to a complete wash and detail service monthly. Members may also order additional car washes during the month at a fee of $160. Additional washes are common in both summer and winter months. The number of members also varies with the season. The number of members and the average number of additional washes by members for the months of interest follow: January February March April May June Members 530 590 1,150 1,290 1,320 1,470 Additional Washes (Average per Member) 2.5 2.8 2.4 2.3 2.6 3.1 Cornwall allows members to pay for dues on credit. Cornwall's experience is that 40 percent of its members pay cash for the dues, 50 percent of the members pay the dues for a month in the next month, 5 percent in the second month after. The remainder is uncollectible. Additional washes are payable in cash. Cornwall estimates that the number of members in July should increase 20 percent above June levels, and the number of additional washes per member should increase by an estimated 12.5 percent. The following information is available for costs incurred in June. All costs except depreciation are paid in cash
Cornwall Mobile Detailing (CMD) is a service that washes and details a customer's vehicle at their home or office. It operates on a membership basis. Members pay $1,900 dues per month, which entitle them to a complete wash and detail service monthly. Members may also order additional car washes during the month at a fee of $160. Additional washes are common in both summer and winter months. The number of members also varies with the season. The number of members and the average number of additional washes by members for the months of interest follow: January February March April May June Members 530 590 1,150 1,290 1,320 1,470 Additional Washes (Average per Member) 2.5 2.8 2.4 2.3 2.6 3.1 Cornwall allows members to pay for dues on credit. Cornwall's experience is that 40 percent of its members pay cash for the dues, 50 percent of the members pay the dues for a month in the next month, 5 percent in the second month after. The remainder is uncollectible. Additional washes are payable in cash. Cornwall estimates that the number of members in July should increase 20 percent above June levels, and the number of additional washes per member should increase by an estimated 12.5 percent. The following information is available for costs incurred in June. All costs except depreciation are paid in cash
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Accounting
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Transcribed Image Text:Cornwall Mobile Detailing (CMD) is a service that washes and details a customer's vehicle at their home or office. It operates on a
membership basis. Members pay $1,900 dues per month, which entitle them to a complete wash and detail service monthly. Members
may also order additional car washes during the month at a fee of $160. Additional washes are common in both summer and winter
months. The number of members also varies with the season. The number of members and the average number of additional washes
by members for the months of interest follow:
January
February
March
April
May
June
Members
530
590
1,150
1,290
1,320
1,470
Service costs
Additional
Washes (Average
per Member)
2.5
2.8
2.4
2.3
2.6
3.1
Cornwall allows members to pay for dues on credit. Cornwall's experience is that 40 percent of its members pay cash for the dues, 50
percent of the members pay the dues for a month in the next month, 5 percent in the second month after. The remainder is
uncollectible. Additional washes are payable in cash.
Cornwall estimates that the number of members in July should increase 20 percent above June levels, and the number of additional
washes per member should increase by an estimated 12.5 percent. The following information is available for costs incurred in June. All
costs except depreciation are paid in cash.
Variable costs
Equipment maintenance
Depreciation (fixed)
Total
Marketing and administrative costs
Marketing (variable).
Administrative (fixed)
Total
Total costs
$ 52,500
48,500
92,000
$ 193,000
$ 40,500
113,500
$ 154,000
$ 347,000
Variable service and marketing costs change with volume, measured by number of members. Fixed depreciation will remain the same,
but fixed administrative costs will increase by 10 percent beginning July 1. Equipment maintenance is outsourced and the contract calls
for a 5 percent increase beginning July 1.
Required:
Prepare a budgeted income statement for July
Note: Do not round Intermediate calculations. Enter your answers rounded to the nearest whole dollars.
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