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. Additional Washes (Average Members per Member) January February 530 2.5 590 2.8 March 1,150 2.4 April May 1,290 2.3 1,320 1,470 June 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. Service costs 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.
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. Additional Washes (Average Members per Member) January February 530 2.5 590 2.8 March 1,150 2.4 April May 1,290 2.3 1,320 1,470 June 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. Service costs 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Additional
Washes (Average
Members
per Member)
January
February
530
2.5
590
2.8
March
1,150
2.4
1,290
2.3
1,320
1,470
2.6
3.1
April
May
June
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.
Service costs
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.
Sales revenue
Answer is not complete.
Cornwall Mobile Detailing
Budgeted Income Statement
For the Month of July
Service costs:
Variable costs
Equipment maintenance
Depreciation (fixed)
Total service costs
$
0
Marketing and administrative:
Marketing (variable)
Administrative (fixed)
Contribution margin
Total marketing and administrative costs
Total costs
Operating profit
$
0.
$
0
$
0
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