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) $50 40 12 Scenario Excellent Fair Poor In addition to the variable costs of service, the owner estimates that other costs are $65,000 plus $8 for each service call in excess of 5,600 calls. Annual administrative and marketing costs are estimated to be $51,000 plus 10 percent of the contribution margin. Excellent Fair Poor Excellent 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? Fair Poor Excellent Fair Poor Contribution Margin Per Service Call $ $ $ $ $ $ SSASALA $ $ $ Number of Service Calls 50 40 12 50 40 12 50 40 12 10,900 8,450 6,150 n Number of Service Calls 10,900 10,900 10,900 8,450 8,450 8,450 6,150 6,150 6,150 Total Contribution Margin Other Costs Marketing and Administrative Operating Profit (Loss) + $ $ $ $ SS $ $ $ $ $ 0 0 0 0 0 0 0 0 0
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) $50 40 12 Scenario Excellent Fair Poor In addition to the variable costs of service, the owner estimates that other costs are $65,000 plus $8 for each service call in excess of 5,600 calls. Annual administrative and marketing costs are estimated to be $51,000 plus 10 percent of the contribution margin. Excellent Fair Poor Excellent 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? Fair Poor Excellent Fair Poor Contribution Margin Per Service Call $ $ $ $ $ $ SSASALA $ $ $ Number of Service Calls 50 40 12 50 40 12 50 40 12 10,900 8,450 6,150 n Number of Service Calls 10,900 10,900 10,900 8,450 8,450 8,450 6,150 6,150 6,150 Total Contribution Margin Other Costs Marketing and Administrative Operating Profit (Loss) + $ $ $ $ SS $ $ $ $ $ 0 0 0 0 0 0 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
4
Transcribed Image Text: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)
$ 50
40
12
Scenario
Excellent
Fair
Poor
In addition to the variable costs of service, the owner estimates that other costs are $65,000 plus $8 for each service call in excess of
5,600 calls. Annual administrative and marketing costs are estimated to be $51,000 plus 10 percent of the contribution margin.
Excellent
Fair
Poor
Excellent
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?
Fair
Poor
Excellent
Fair
Poor
Contribution
Margin Per
Service Call
$
$
$
$
$
$
LA SA
Number of
Service Calls
$
$
$
10,900
8,450
6,150
50
40
12
50
40
12
50
40
12
Number of
Service Calls
10,900
10,900
10,900
8,450
8,450
8,450
6,150
6,150
6,150
Total
Contribution
Margin
Other Costs
Marketing and
Administrative
Operating
Profit (Loss)
$
$
$
$
$
$
$
$
$
0
0
0
0
0
0
0
0
0
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education