Reference no: EM133183175
Question - Crane Horticulture provides and maintains live plants in office buildings. The company's 858 customers are charged $33 per month for this service, which includes weekly watering visits. The variable cost to service a customer's location is $19 per month. The company incurs $2,058 each month to maintain its fleet of four service vans and $3,146 each month in salaries. Crane pays a bookkeeping service $2 per customer each month to handle all invoicing and accounting functions.
What is the expected monthly operating income if 200 customers are added?
Also- Mr. Crane is exploring options to reduce the annual bookkeeping costs.
Option 1: Renegotiate the current contract with the bookkeeping service to pay a flat fee of $10,368 per year plus $1 per customer per month.
Option 2: Hire a part-time bookkeeper for $19,546 per year to handle the invoicing and simple accounting. He would need to pay $6,560 per year to have taxes and year-end financial statements prepared.
Compare the current bookkeeping cost with the two options at customer levels of 858, 1,252, and 1,286.
Compare the current bookkeeping cost with the two options at customer levels of 858, 1,252, and 1,286.
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