FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Exercise 13-43 (Algo) Prepare Budgeted Financial Statements (LO 13-6) Cornwall Mobile Detailing (CMD) is a service that washes and details a customer's vehicle at their home or office. It operates on a membership basis. Members pay $2,000 dues per month, which entitle them to a complete wash and detail service monthly. Members may also order additional car washes during the month at a fee of $165. Additional washes are common in both summer and winter months. The number of members also varies with the season. The number of members and the average number of additional washes by members for the months of interest follow: Additional Washes (Average Members per Member) January February 540 2.6 600 2.9 March 1,160 2.5 April 1,300 2.4 1,330 1,480 2.7 3.2 May June Cornwall allows members to pay for dues on credit. Cornwall's experience is that 40 percent of its members pay cash for the dues, 50 percent of the members pay the dues for a month in the next month, 5 percent in the second month after. The remainder is uncollectible. Additional washes are payable in cash. Cornwall estimates that the number of members in July should increase 20 percent above June levels, and the number of additional washes per member should increase by an estimated 12.5 percent. The following information is available for costs incurred in June. All costs except depreciation are paid in cash. Service costs Variable costs Equipment maintenance Depreciation (fixed) Total Marketing and administrative costs Marketing (variable) Administrative (fixed) Total Total costs $ 53,000 49,000 93,000 $ 195,000 $ 41,000 114,000 $ 155,000 $ 350,000 Variable service and marketing costs change with volume, measured by number of members. Fixed depreciation will remain the same, but fixed administrative costs will increase by 10 percent beginning July 1. Equipment maintenance is outsourced and the contract calls for a 5 percent increase beginning July 1. Required: Prepare a budgeted income statement for July. Note: Do not round intermediate calculations. Enter your answers rounded to the nearest whole dollars. Sales revenue Service costs: Variable costs Cornwall Mobile Detailing Budgeted Income Statement For the Month of July Equipment maintenance Depreciation (fixed) Total service costs Marketing and administrative: 0 Marketing (variable) Administrative (fixed) Total marketing and administrative costs $ 0 Total costs $ 0 Operating profit $ 0
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Transcribed Image Text:Exercise 13-43 (Algo) Prepare Budgeted Financial Statements (LO 13-6) Cornwall Mobile Detailing (CMD) is a service that washes and details a customer's vehicle at their home or office. It operates on a membership basis. Members pay $2,000 dues per month, which entitle them to a complete wash and detail service monthly. Members may also order additional car washes during the month at a fee of $165. Additional washes are common in both summer and winter months. The number of members also varies with the season. The number of members and the average number of additional washes by members for the months of interest follow: Additional Washes (Average Members per Member) January February 540 2.6 600 2.9 March 1,160 2.5 April 1,300 2.4 1,330 1,480 2.7 3.2 May June Cornwall allows members to pay for dues on credit. Cornwall's experience is that 40 percent of its members pay cash for the dues, 50 percent of the members pay the dues for a month in the next month, 5 percent in the second month after. The remainder is uncollectible. Additional washes are payable in cash. Cornwall estimates that the number of members in July should increase 20 percent above June levels, and the number of additional washes per member should increase by an estimated 12.5 percent. The following information is available for costs incurred in June. All costs except depreciation are paid in cash. Service costs Variable costs Equipment maintenance Depreciation (fixed) Total Marketing and administrative costs Marketing (variable) Administrative (fixed) Total Total costs $ 53,000 49,000 93,000 $ 195,000 $ 41,000 114,000 $ 155,000 $ 350,000 Variable service and marketing costs change with volume, measured by number of members. Fixed depreciation will remain the same, but fixed administrative costs will increase by 10 percent beginning July 1. Equipment maintenance is outsourced and the contract calls for a 5 percent increase beginning July 1. Required: Prepare a budgeted income statement for July. Note: Do not round intermediate calculations. Enter your answers rounded to the nearest whole dollars. Sales revenue Service costs: Variable costs Cornwall Mobile Detailing Budgeted Income Statement For the Month of July Equipment maintenance Depreciation (fixed) Total service costs Marketing and administrative: 0 Marketing (variable) Administrative (fixed) Total marketing and administrative costs $ 0 Total costs $ 0 Operating profit $ 0
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