Question

Henley Horticulture provides and maintains live plants in office buildings. The company's 884 customers are charged $37 per month for this service, which includes weekly watering visits. The variable cost to service a customer's location is $17 per month. The company incurs $2,194 each month to maintain its fleet of four service vans and $3,004 each month in salaries. Henley pays a bookkeeping service $2 per customer each month to handle all invoicing and acounting functions. Prepare Henley's contribution format income statement for the month. Per Unit

Answer 1

Henley contribution statement for the month:

Expected monthly earnings if 174 customers are added & Comparison of the current cost with the 2 options:

What is the expected monthly operating income if 174 customers are added? Expected monthly operating income Existing operating incomeContribution of additional 174 customers Expected monthly operating income 10,714(174 $18) Expected monthly operating income $ 13,846 Comparison of current annual bookkeeping cost 884 21,216 9($2 x customers x 12 months (2 884 12) 1597 1438 S 38,328 ($2*1597*12) Current cost 34,512 ($2*1438 12) $27,753 (10497 + Option 1: $10,497 ($1 x customers x 12 months) $21,105 S29,661 (10497+ ($1*1597* (10497+ ($1*884*12) ($1*1438 12) S 24,694 (18496 6198) Option 2: $18,496 $6,198 $ 24,694 (18496 +6198) S 24,694 (18496 + 6198)