Question

Jolly Cleaners offers residential and commercial cleaning services. Clients pay a fixed monthly fee for the service, but can cancel the service at the end of any month. In addition to the employees who do the actual cleaning, the firm includes two managers who handle the administrative tasks (human resources, accounting, and so on) and one dispatcher, who assigns the cleaning employees to jobs on a daily basis.

On average, residential clients pay $320 per month for cleaning services and the commercial clients pay $1,800 per month. A typical residential client requires 10 hours a month for cleaning and a typical commercial client requires 40 hours a month. In March, Jolly Cleaners had 30 commercial clients and 160 residential clients. Cleaners are paid $15 per hour and are only paid for the hours actually worked. Supplies and other variable costs are estimated to cost $5 per hour of cleaning.

Other monthly costs (all fixed) are $49,000 SG&A, including managerial and dispatcher salaries, and $2,900 in other expenses.

Jolly Cleaners has earned positive reviews on social media in the area and the managers expect to grow. For April, they forecast a 5 percent increase in residential clients and a 10 percent increase in commercial clients.

For July, Jolly Cleaners has budgeted profit of $4,900 based on 40 commercial clients.

Required:

Prepare a budgeted income statement for Jolly Cleaners for July. (Round intermediate calculations to nearest whole number.)

Answer 1

Solution:

Number of residential clients (160*105%)	168.0
Number of commercial clients (30*110%)	33.0
Jolly Cleaners
Budgeted Income Statement
	Residential	Commerical	Total
Number of clients: (A)	168.0	33.0	201.0
Number of hours: (B)	10	40
Number of Client-Hours: (C) = (A) x (B)	1,680.00	1,320.00	3,000.00
Revenue per client (D)	320	1800
Total Revenue (E) = (D) x (A)	53760	59400	113160
Cost of Cleaners (F) = $15 x (C)	25200	19800	45000
Supplies & Other Variable Cost (G) = $5 x (C)	8400	6600	15000
Total variable cost	33600	26400	60000
Contribution Margin	20160	33000	53160
Less: Total Fixed Costs:
SG&A			49000
Other costs			2900
Total Fixed cost			51900
Net Income			1260