Concept explainers
Varmit-B-Gone is a pest control service that operates in a suburban neighborhood. The company attempts to make service calls at least once a month to all homes that subscribe to its service. It makes more frequent calls during the summer. The number of subscribers also varies with the season. The number of subscribers and the average number of calls to each subscriber for the months of interest follow:
Subscribers | Service calls (per subscriber) | |||||
March | 650 | 0.6 | ||||
April | 750 | 0.9 | ||||
May | 1,450 | 1.5 | ||||
June | 1,650 | 2.5 | ||||
July | 1,650 | 3.0 | ||||
August | 1,500 | 2.4 | ||||
The average price charged for a service call is $80. Of the service calls, 30 percent are paid in the month the service is rendered, 60 percent in the month after the service is rendered, and 8 percent in the second month after. The remaining 2 percent is uncollectible.
Varmit-B-Gone estimates that the number of subscribers in September should fall 10 percent below August levels, and the number of service calls per subscriber should decrease by an estimated 20 percent. The following information is available for costs incurred in August. All costs except
Service costs | ||
Variable costs | $ | 23,000 |
Maintenance and repair | 21,000 | |
Depreciation (fixed) | 41,000 | |
Total | $ | 85,000 |
Marketing and administrative costs | ||
Marketing (variable) | $ | 13,500 |
Administrative (fixed) | 54,000 | |
Total | $ | 67,500 |
Total costs | $ | 152,500 |
Variable
Required:
Prepare a
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps
- Felch Tacos is a drive-thru restaurant in a coastal town with significant seasonal changes in business. The owners are trying to decide whether to remain open during the fourth quarter of the year (October through December) given the reduced business. They estimate that the number of meals sold in the fourth quarter will only be 40 percent of those sold in the third quarter. The number of meals sold in the third quarter was 37,000 at an average price of $7.50. The owners plan to offer a somewhat smaller menu during the fourth quarter and expect the average meal to sell for $6. The variable meal costs and the marketing cost per meal are not expected to change. The fixed meal costs will decline by 10 percent and the administrative costs will decline by 20 percent as the restaurant will be open fewer hours. The following cost information is available for third quarter: Meal costs Food costs (variable) $ 24,600 Labor (variable) 68,700 Other meal costs (variable) 19,000 Fixed…arrow_forwardOn January 1 of the current year, Herkimer & Co. purchases, a group of 8 laptops for its new hires. The laptops are purchased for $2,500 each with a residual value of $400 each. Herkimer expects the laptops to be used for 3 years. At the end of the current year, Herkimer & Co. sells two laptops for $1,700 each. Required: Prepare the journal entries to record the purchase of the laptops, the depreciation on the laptops, and the sale of the laptops in Year 1.arrow_forward3) A newly opened grocery store, to attract customers, started giving 5 loyalty points for each dollar spent in the store. These points can be redeemed in blocks of 5000 and customers are eligible to receive a winter jacket. Since it was newly opened it did not have any past record of how many customers will exercise this offer, but because of the winter season round the corner, it is hoping that 90% of the people will make use of this redemption offer. The store purchases these jackets directly from the manufacturer at $40 per each. In the month of October, the total sales of the store were $480,000. Please calculate the loyalty redemption amount that the store needs to provide for October in its books of accounts.arrow_forward
- Lori Ramos operates a small retail kiosk in a mall located in Vancouver, British Columbia. She has opted to use the quick method for preparing her GST returns. Her financial results for her latest reporting period (excluding 5% GST) are as follows: Sales $200,000 Inventory purchases 70,000 Employee salaries 23,000 Interest on line of credit 15,000 Rent 18,000 Leasehold improvements 12,000 Determine Lori's owing or refund for the year using the quick method. The remittance rate is 1.8%arrow_forwardAdrian's Restaurant is a 66 -seat restaurant open every day for lunch and dinner. For the month of May, it plans to tum over the restaurant 1.5 times at lunch and 2.5 times at dinner. Each server can handle 22 guests at a time. Lunch shifts are typically 4 hours and dinner shifts are typically 6 hours. Servers earn $12 per hour. Calculate the cost of server labour for lunch, dinner and in total for the month of May. Do not enter dollar signs or commas in the input boxes. Round all answers to the nearest whole number. Lunch Labour Cost =$ Dinner Labour Cost =$ Total Labour Cost =$arrow_forwardCIA Review, Incorporated, provides review courses twice each year for students studying to take the CIA exam. The cost of textbooks Is Included in the registration fee. Text material requires constant updating and is useful for only one course. To minimize printing costs and ensure availability of books on the first day of class, CIA Review has books printed and delivered to its offices two weeks in advance of the first class. To ensure that enough books are available, CIA Review normally orders 10 percent more than expected enrollment. Usually there is an oversupply and books are thrown away. However, demand occasionally exceeds expectations by more than 10 percent and there are too few books available for student use. CIA Review has been forced to turn away students because of a lack of textbooks. CIA Review expects to enroll approximately 400 students per course. The tuition fee is $2,500 per student. The cost of teachers is $45,000 per course, textbooks cost $180 each, and other…arrow_forward
- Rocky Guide Service provides guided 1 to 5 day hiking tours throughout the Rocky Mountains. Wilderness Tours hires Rocky to lead various tours that Wilderness sells. Rocky receives $1,500 per tour day, and shortly after the end of each month, Rocky learns whether it will receive a $150 bonus per tour day it guided during the previous month if its service during that month received an average evaluation of "excellent" by Wilderness customers. The $1,500 per day and any bonus due are paid in one lump payment shortly after the end of each month. On July 1, based on prior experience, Rocky estimated there is a 30% chance it will earn the bonus for July tours. It guided a total of 10 days from July 1 to July 15. On July 16, based on Rocky’s view that it had provided excellent service during the first part of the month, Rocky revised its estimate to an 80% chance it would earn the bonus for July tours. Rocky also guided customers for 15 days from July 16 to July 31. On August 5, Rocky…arrow_forwardVernon Cabins is a small motel chain located near state and national parks. Each property is made up of separate cabins. The chain has 10 properties with an average of 15 cabins at each property. In year 1, the occupancy rate (the number of rooms filled divided by the number of rooms available) was 80 percent, based on a 180-day season. The properties are closed from late fall until early spring. The average rate was $225 per night per cabin. The basic unit of operation is the “night,” which is one cabin occupied for one night. The operating income for year 1 is as follows. Vernon Cabins Operating Income Year 1 Sales revenue Lodging $ 4,860,000 Incidentals 475,200 Forfeited deposits 129,600 Total revenues $ 5,464,800 Costs Labor $ 1,748,000 Incidentals 451,200 Miscellaneous 86,400 Utilities, etc. 95,000 Depreciation 550,000 Management 120,000 Marketing 230,000 Property taxes 1,640,000 Total costs $ 4,920,600 Operating profit $ 544,200 Other…arrow_forwardBeached is a retail outlet situated in a very popular tourist town not far from Canberra. It is very popular during school holidays, with the peak tourist season being in December and January. Sales consist of cash sales to retail customers (70%) and credit sales to tourist operators (30%). Credit sales are collected 20% in the month of sale, 60% in the month following the sale and 20% in the second month following the sale. Opening Accounts Receivable are $120,000. Inventory is marked-up 70% on cost and inventory opening balances are required to be 60% of the month's expected sales. Inventory is purchased on credit with 40% paid in the month following the purchase and the remainder paid two months following the purchase. Opening Accounts Payable is $80,000. Using tha above information, prepare the following: 1. Prepare a cash receipts budget for the six months 2. Prepare a cash payments budget for the six months 3. Prepare a budgeted pfofit and loss to Gross Profit for the six months…arrow_forward
- BrightLine Medical Products delivers medical supplies to small offices across the metro area. The typical BrightLine customer orders $1,200 worth of supplies in the average month. BrightLine believes that the average customer stays with BrightLine for 2.4 years. What is BrightLine's MONTHLY CHURN RATE for these small office customers? (Report your answer as a percent. Report 25.5%, for example, as "25.5". Rounding: tenth of a percent.) ANSWER IS: (3.5), but HOW is that the answer? Please explain.arrow_forwardPlease help with the questions, thanks.arrow_forwardBodow is an entertainment complex located in Trinidad & Tobago. It offers various activitiessuch as music, rides, slides, and souvenir shopping, and customers pay a fixed fee to enter.The complex has been in operation for the past seven years and remains open throughout theyear. However, weather-related issues often lead to a significant decrease in customerattendance, usually by 50%, on approximately 30 days each year.Bodow has experienced substantial success, with customer numbers increasing byapproximately 15% annually. Sales at Bodow are categorized as cash sales and credit cardsales. All ticket sales are recorded on a computer, including the amount of each sale and thenumber of tickets issued. This information is electronically transferred to the accounts office.Cash collected from each ticket office is counted by two accounts clerks and two securityguards before being banked daily. The total cash from each ticket office is reconciled with thesales information transferred from…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education