Lamphere Lawn Care provides lawn and gardening services. The price of the service is fixed at a flat rate for each service, and mostcosts of providing the service are the same, given the similarity in the lawns and lots. The owner budgets income by estimating twofactors that fluctuate with the economy: the contribution margin associated with each service call and the number of customers whowill request lawn service. Looking at next year, the owner develops the following estimates of contribution margin (price less variablecost of the service, including labor) and the estimated number of service calls. Although the owner understands that it is not strictlytrue, the owner assumes that the cost of fuel and the number of customers are independent.Contribution Margin per Service Call(Price -Variablecost)$ 302012ScenarioExcellentFairPoorIn addition to the variable costs of service, the owner estimates that other posts are $47,000 plus $8 for each service call in excess of3,400 calls. Annual administrative and marketing costs are estimated to be $29,000 plus 10 percent of the contribution margin.ExcellentFairPoorExcellentRequired:Use a spreadsheet to prepare an analysis of the possible operating income for Lamphere Lawn Care similar to that in Exhibit 13.16.What is the range of possible operating incomes?FairPoorContributionMargin PerService Call$$$$$$Number ofService Calls302010,3507,3005,60012302012Number ofService Calls10,35010,35010,3507,3007,3007,300TotalContributionMarginOther CostsMarketing andAdministrativeOperatingProfit (Loss)$$$$·ss$$000OOOO00 Lamphere Lawn Care provides lawn and gardening services. The price of the service is fixed at a flat rate for each service, and mostcosts of providing the service are the same, given the similarity in the lawns and lots. The owner budgets income by estimating twofactors that fluctuate with the economy: the contribution margin associated with each service call and the number of customers whowill request lawn service. Looking at next year, the owner develops the following estimates of contribution margin (price less variablecost of the service, including labor) and the estimated number of service calls. Although the owner understands that it is not strictlytrue, the owner assumes that the cost of fuel and the number of customers are independent.Contribution Margin per Service Call(Price -Variablecost)$ 302012ScenarioExcellentFairPoorIn addition to the variable costs of service, the owner estimates that other posts are $47,000 plus $8 for each service call in excess of3,400 calls. Annual administrative and marketing costs are estimated to be $29,000 plus 10 percent of the contribution margin.ExcellentFairPoorExcellentRequired:Use a spreadsheet to prepare an analysis of the possible operating income for Lamphere Lawn Care similar to that in Exhibit 13.16.What is the range of possible operating incomes?FairPoorContributionMargin PerService Call$$$$$$Number ofService Calls302010,3507,3005,60012302012Number ofService Calls10,35010,35010,3507,3007,3007,300TotalContributionMarginOther CostsMarketing andAdministrativeOperatingProfit (Loss)$$$$·ss$$000OOOO00

Selling price per unit: It is the price at which a unit of product is sold in the market.Variable…

Lamphere Lawn Care provides lawn and gardening services. The price of the service is fixed at a flat rate for each service, and most costs of providing the service are the same, given the similarity in the lawns and lots. The owner budgets income by estimating two factors that fluctuate with the economy: the contribution margin associated with each service call and the number of customers who will request lawn service. Looking at next year, the owner develops the following estimates of contribution margin (price less variable cost of the service, including labor) and the estimated number of service calls. Although the owner understands that it is not strictly true, the owner assumes that the cost of fuel and the number of customers are independent. Contribution Margin per Service Call (Price - Variable cost) $ 30 20 12 Scenario Excellent Fair Poor In addition to the variable costs of service, the owner estimates that other posts are $47,000 plus $8 for each service call in excess of 3,400 calls. Annual administrative and marketing costs are estimated to be $29,000 plus 10 percent of the contribution margin. Excellent Fair Poor Excellent Fair Poor Required: Use a spreadsheet to prepare an analysis of the possible operating income for Lamphere Lawn Care similar to that in Exhibit 13.16. What is the range of possible operating incomes? Contribution Margin Per Service Call $ $ $ $ $ $ 30 882882 20 12 30 Number of Service Calls. 20 10,350 7,300 5,600 12 Number of Service Calls 10,350 10,350 10,350 7,300 7,300 7,300 Total Contribution Margin Other Costs Marketing and Administrative Operating Profit (Loss) $ $ $ $ $ oooo00

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q