Question

Eden 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:

Eden Pool Cleaning Service
Income Statement
For the Month Ended July 31, 2018
	Blue	Mitz	Faulkner	Total
Service Revenue	$5,000	$8,000	$6,000	$19,000
Variable Costs	3,000	4,000	2,400	9,400
Contribution Margin	2,000	4,000	3,600	9,600
Fixed Costs				5,000
Operating Income				$4,600

Requirements:

1. Calculate the contribution margin ratio for each business segment.

2. The business segments had the following numbers of customers: Blue: 50, Mitz: 80, Faulkner: 60. Compute the service revenue per customer, variable cost per customer, and contribution margin per customer for each business segment.

3. Which business segment was most profitable? List some possible reasons why this segment was most profitable. How might the various reasons affect the company in the long term?

Answer 1

formulas and explanation

contribution margin ration = contribution margin /sales revenue*100

sales revenue per customer = sales revenue / number of customers

variable cost per customer = variable cost/ number of customers

contribution margin per customer = contribution margin / number of customers