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)March7000.6April8000.9May1,5001.5June1,7002.5July1,7003.0August2,0002.4

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 depreciation are paid in cash.

 

Service costsVariable costs$25,000Maintenance and repair23,000Depreciation (fixed)43,000Total$91,000Marketing and administrative costsMarketing (variable)$25,000Administrative (fixed)80,000Total$105,000Total costs

$196,000

 

Variable service and marketing costs change with volume. Fixed depreciation will remain the same, but fixed administrative costs will increase by 5 percent beginning September 1. Maintenance and repair are provided by 

contract, which calls for a 1 percent increase in September.

 

Create a budgeted income statement for September.

Answer rating: 100% (QA)

Answer To calculate the estimated revenue for VarmitBGone in September we need to consider the chang... View the full answer