Varmit-B-Gone is a pest control service that operates in a suburban neighborhood. The company attempts to make service calls at least once a month to all homes that subscribe to its service. It makes more frequent calls during the summer. The number of subscribers also varies with the season. The number of subscribers and the average number of calls to each subscriber for the months of interest follow: Subscribers Service calls (per subscriber) March 1,350 0.6 April 1,450 0.9 May 2,150 1.5 June 2,350 2.5 July 2,350 3.0 August 2,000 2.4 The average price charged for a service call is $80. Of the service calls, 30 percent are paid in the month the service is rendered, 60 percent in the month after the service is rendered, and 8 percent in the second month after. The remaining 2 percent is uncollectible. Varmit-B-Gone estimates that the number of subscribers in September should fall 10 percent below August levels, and the number of service calls per subscriber should decrease by an estimated 20 percent. The following information is available for costs incurred in August. All costs except depreciation are paid in cash. Service costs Variable costs $ 16,000 Maintenance and repair 14,000 Depreciation (fixed) 34,000 Total $ 64,000 Marketing and administrative costs Marketing (variable) $ 46,000 Administrative (fixed) 90,000 Total $ 136,000 Total costs $ 200,000 Variable service and marketing costs change with volume. Fixed depreciation will remain the same, but fixed administrative costs will increase by 5 percent beginning September 1. Maintenance and repair are provided by contract, which calls for a 1 percent increase in September. Required: Prepare a budgeted income statement for September. (Round intermediate calculations to 2 decimals places.)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Exercise 13-39 (Algo) Prepare Budgeted Financial Statements (LO 13-6)
Varmit-B-Gone is a pest control service that operates in a suburban neighborhood. The company attempts to make service calls at least once a month to all homes that subscribe to its service. It makes more frequent calls during the summer. The number of subscribers also varies with the season. The number of subscribers and the average number of calls to each subscriber for the months of interest follow:
| Subscribers | Service calls (per subscriber) | |||||
| March | 1,350 | 0.6 | ||||
| April | 1,450 | 0.9 | ||||
| May | 2,150 | 1.5 | ||||
| June | 2,350 | 2.5 | ||||
| July | 2,350 | 3.0 | ||||
| August | 2,000 | 2.4 | ||||
The average price charged for a service call is $80. Of the service calls, 30 percent are paid in the month the service is rendered, 60 percent in the month after the service is rendered, and 8 percent in the second month after. The remaining 2 percent is uncollectible.
Varmit-B-Gone estimates that the number of subscribers in September should fall 10 percent below August levels, and the number of service calls per subscriber should decrease by an estimated 20 percent. The following information is available for costs incurred in August. All costs except
| Service costs | ||
| Variable costs | $ | 16,000 |
| Maintenance and repair | 14,000 | |
| Depreciation (fixed) | 34,000 | |
| Total | $ | 64,000 |
| Marketing and administrative costs | ||
| Marketing (variable) | $ | 46,000 |
| Administrative (fixed) | 90,000 | |
| Total | $ | 136,000 |
| Total costs | $ | 200,000 |
Variable
Required:
Prepare a
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