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 wha 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 Scenario. Excellent Fair Poor (Price - Number of Variable cost) Service Calls $ 40 30 12 Excellent In addition to the variable costs of service, the owner estimates that other costs are $59,000 plus $8 for each service call in excess 4,600 calls. Annual administrative and marketing costs are estimated to be $41,000 plus 10 percent of the contribution margin 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? 10,650 8,200 5,900 Contribution Margin Per Service Call 40 Number of Service Calls 10.650 in eenl Total Contribution Margin Other Costs Marketing and Administrative Operating Profit (Loss)
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 wha 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 Scenario. Excellent Fair Poor (Price - Number of Variable cost) Service Calls $ 40 30 12 Excellent In addition to the variable costs of service, the owner estimates that other costs are $59,000 plus $8 for each service call in excess 4,600 calls. Annual administrative and marketing costs are estimated to be $41,000 plus 10 percent of the contribution margin 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? 10,650 8,200 5,900 Contribution Margin Per Service Call 40 Number of Service Calls 10.650 in eenl Total Contribution Margin Other Costs Marketing and Administrative Operating Profit (Loss)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Scenario
Excellent
Fair
Poor
In addition to the variable costs of service, the owner estimates that other costs are $59,000 plus $8 for each service call in excess of
4,600 calls. Annual administrative and marketing costs are estimated to be $41,000 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
S
Contribution
Margin Pera
Service Call
$
$
S
Variable cost) Service Calls
10,650
8,200
5,900
$
S
$
5:40
30
12
$
S
40
30
12
40
30
12
40
30
12
Number of
Service Calls
10,650
10,650
10,650
8,200
8,200
8,200
5,900
5.900
5.900
Total
Contribution
Margin
Other Costs
Marketing and
Administrative
Operating
Profit (Loss)
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 Coll
Scenario
Excellent
Fair
Poor
(Price -
Number of
Variable cost) Service Calls
$40
Excellent
30
12
In addition to the variable costs of service, the owner estimates that other costs are $59,000 plus $8 for each service call in excess of
4,600 calls. Annual administrative and marketing costs are estimated to be $41,000 plus 10 percent of the contribution margin
Contribution
Margin Per
Service Call-
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?
10,650
8,200
5,900
40
20
Number of
Service Calls
10.650
in cent
Total
Contribution
Margin
57
Other Costs
Marketing and
Administrative
Operating
Profit (Loss)
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