Lamphere Lawn Care provides lawn and gardening services. The price of the service is fixed at a flat rate for each service, an most costs of providing the service are the same, given the similarity in the lawns and lots. The owner budgets income by estimating two factors that fluctuate with the economy: the contribution margin associated with each service call and the number of customers who will request lawn service. Looking at next year, the owner develops the following estimates of contribution margin (price less variable cost of the service, Including labor) and the estimated number of service calls. Althoug the owner understands that it is not strictly true, the owner assumes that the cost of fuel and the number of customers are Independent. Contribution Margin per Service Call Scenario Excellent Fair Poor (Price - Number of Variable cost) Service Calls. $.30 20 12 10,450 8,000 5,700 In addition to the variable costs of service, the owner estimates that other costs are $51,000 plus $8 for each service call in excess of 3,800 calls. Annual administrative and marketing costs are estimated to be $33,000 plus 10 percent of the contribution margin. Required: Use a spreadsheet to prepare an analysis of the possible operating income for Lamphere Lawn Care similar to that in Exhibit 13.16. What is the range of possible operating incomes?
Lamphere Lawn Care provides lawn and gardening services. The price of the service is fixed at a flat rate for each service, an most costs of providing the service are the same, given the similarity in the lawns and lots. The owner budgets income by estimating two factors that fluctuate with the economy: the contribution margin associated with each service call and the number of customers who will request lawn service. Looking at next year, the owner develops the following estimates of contribution margin (price less variable cost of the service, Including labor) and the estimated number of service calls. Althoug the owner understands that it is not strictly true, the owner assumes that the cost of fuel and the number of customers are Independent. Contribution Margin per Service Call Scenario Excellent Fair Poor (Price - Number of Variable cost) Service Calls. $.30 20 12 10,450 8,000 5,700 In addition to the variable costs of service, the owner estimates that other costs are $51,000 plus $8 for each service call in excess of 3,800 calls. Annual administrative and marketing costs are estimated to be $33,000 plus 10 percent of the contribution margin. Required: Use a spreadsheet to prepare an analysis of the possible operating income for Lamphere Lawn Care similar to that in Exhibit 13.16. What is the range of possible operating incomes?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
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Problem 5CE: Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each...
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Lamphere Lawn Care provides lawn and gardening services. The price of the service is fixed at a flat rate for each service, and
most costs of providing the service are the same, given the similarity in the lawns and lots. The owner budgets income by
estimating two factors that fluctuate with the economy: the contribution margin associated with each service call and the
number of customers who will request lawn service. Looking at next year, the owner develops the following estimates of
contribution margin (price less variable cost of the service, including labor) and the estimated number of service calls. Although
the owner understands that it is not strictly true, the owner assumes that the cost of fuel and the number of customers are
Independent.
Contribution Margin per Service Call
Scenario
Excellent
Fair
Poor
(Price -
Number of
Variable cost) Service Calls
$:30
20
12
10,450
8,000
5,700
In addition to the variable costs of service, the owner estimates that other costs are $51,000 plus $8 for each service call in
excess of 3,800 calls. Annual administrative and marketing costs are estimated to be $33,000 plus 10 percent of the
contribution margin.
Required:
Use a spreadsheet to prepare an analysis of the possible operating Income for Lamphere Lawn Care similar to that in Exhibit
13.16. What is the range of possible operating incomes?
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