Question

Pool Cleaning Service provides pool cleaning services to residential customers. The company has three​ employees, each assigned to specific customers. The company considers each​ employee's territory as a business segment. The company incurs variable costs that include the​ employees' wages, pool​ chemicals, and gas for the service vans. Fixed costs include depreciation on the service vans. Following is the income statement for the month of July:

Felicity Pool Cleaning Service Income Statement For the Month Ended July 31, 2018 Blue Morrissey $ 8,000 $ 2,400 $ 3,200 1.440 Service Revenue Filip 4,000 $ 1,200 Total 14,400 5,840 Variable Costs Contribution Margin Fixed Costs 4,800 960 2,800 8,560 4,000 4,560 Operating Income

Possible reasons for the profitability of this business segment include the​ following:

Answer 1

REQUIREMENT 1 CONTRIBUTION MARGIN RATIO 60% BYSON MORRISSEY FREEZY CONTRIBUTION MARGIN / SALES REVENUE 4800 / 8000) = 960/ 24001 28001/ 40001 11 40% 70%

REQUIREMENT 2 TOTAL VARIABLE COST TOTAL CONTRIBUTION MARGIN CUSTOMERS 4800 50 960) 20 28001 1001 TOTAL SERVICE REVENUE 8000 2400 4000 BYSON MORRISSEY FREEZY 3200 1440 1200 SERVICE REVENUE PER CUSTOMER (A/D) VARIABLE COST PER CUSTOMER (B/0) CONTRIBUTION MARGIN PER CUSTOMER (C/D) BYSON MORRISSEY FREEZY

REQUIREMENT 3 BYSON'S SERVICE CENTRE IS MOST PROFITABLE BECAUSE SALES REVENUE PER CUSTOMER IS HIGHEST OF ALL