Question

Jolly Cleaners offers residential and commercial cleaning services. Clients pay a fixed monthly fee for the service, but can cancel the service at the end of any month. In addition to the employees who do the actual cleaning, the firm includes two managers who handle the administrative tasks (human resources, accounting, and so on) and one dispatcher, who assigns the cleaning employees to jobs on a daily basis.

On average, residential clients pay $300 per month for cleaning services and the commercial clients pay $1,900 per month. A typical residential client requires 10 hours a month for cleaning and a typical commercial client requires 50 hours a month. In March, Jolly Cleaners had 40 commercial clients and 180 residential clients. Cleaners are paid $15 per hour and are only paid for the hours actually worked. Supplies and other variable costs are estimated to cost $4 per hour of cleaning.

Other monthly costs (all fixed) are $55,000 SG&A, including managerial and dispatcher salaries, and $3,500 in other expenses.

Jolly Cleaners has earned positive reviews on social media in the area and the managers expect to grow. For April, they forecast a 5 percent increase in residential clients and a 10 percent increase in commercial clients.

Required:

Prepare a budgeted income statement for Jolly Cleaners for April.

JOLLY CLEANERS Budgeted Income Statement For the month of April Revenues: Commercial Residential Total revenue Expenses: Cleaner compensation Supplies SG&A Other expenses Total expenses Income

Answer 1

1.) Residential clients pay $300 per month for cleaning services. - residential client requires 10 hours a month for cleaning.

Per Hour Cost - $300 / 10 = $ 30

2.) Commercial clients pay $1,900 per month for cleaning services. - commercial client requires 50 hours a month for cleaning.

Per Hour Cost - $1,900 / 50 = $ 38

In MARCH

Jolly Cleaners had 40 Commercial clients. Jolly Cleaners had 180 residential clients.

Cleaners are paid $15 per hour and are only paid for the hours actually worked.

Commercial client	Residential Client
40 sites * 50 hours * $38 /hour	180 sites * 10 hours * $30 /hour
$76,000	$54,000

Hours worked by labour

Commercial Site = 40 * 50 hours - 200 hours

Residential site = 180 * 10 hours - 1800 hours

Payment to labourer

Commercial - 200 hours * $ 15 / hour - $3,000
Residential -1800 hours * $ 15 / hours - $27,000

Variable cost @ $4 / hour = 2000 hour * $4 = $8,000

Jolly Cleaners Budget Statement March
Revenues
Commercial Client	$76,000
Residential Client	$54,000
TOTAL REVENUE	$130,000
Expenses
Cleaner Compensation	$30,000
Supplies	$8,000
Fixed Cost ( S&G )	$55,000
Other Expense	$3,500
Total Expenses	$96,500
Income Earned	$33,500

Jolly Cleaners has earned positive reviews on social media in the area and the managers expect to grow. For April, they forecast a 5 percent increase in residential clients and a 10 percent increase in commercial clients.

No. of Residential Client - +@5% increase
March - 180 April - 189

No. of Commercial Client - +@10% increase

March - 40 April - 44

Commercial client	Residential Client
44 sites * 50 hours * $38 /hour	189 sites * 10 hours * $30 /hour
$83,600	$56,700

Hours worked by labour

Commercial Site = 44 * 50 hours - 220 hours

Residential site = 189 * 10 hours - 1890 hours

Payment to labourer

Commercial - 220 hours * $ 15 / hour - $3,300
Residential -1890 hours * $ 15 / hours - $28,350

Variable cost @ $4 / hour = 2,110 hour * $4 = $8,440

Jolly Cleaners Budget Statement April
Revenues
Commercial Client	$83,600
Residential Client	$56,700
TOTAL REVENUE	$140,300
Expenses
Cleaner Compensation	$31,650
Supplies	$8,440
Fixed Cost ( S&G )	$55,000
Other Expense	$3,500
Total Expenses	$98,590
Income Earned	$41,710