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 $240 per month for cleaning services and the commercial clients pay $1,700 per month. A typical residential client requires 10 hours a month for cleaning and a typical commercial client requires 50 hours a month. In March, Jolly Cleaners had 40 commercial clients and 100 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 $4 per hour of cleaning.

Other monthly costs (all fixed) are $36,000 SG&A, including managerial and dispatcher salaries, and $2,600 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 10 percent increase in residential clients and a 15 percent increase in commercial clients.

For July, Jolly Cleaners has budgeted profit of $2,900 based on 50 commercial clients.

Required:

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

JOLLY CLEANERS
Budgeted Income Statement
For the month of July
Revenues:
Commercial
Residential
Total revenue
Expenses:
Cleaner compensation
Supplies
SG&A
Other expenses
Total expenses
Income

Answer 1

Solution:

Number of residential clients (100*110%)	110.0
Number of commercial clients (40*115%)	46.0
Jolly Cleaners
Budgeted Income Statement
	Residential	Commerical	Total
Number of clients: (A)	110.0	46.0	156.0
Number of hours: (B)	10	50
Number of Client-Hours: (C) = (A) x (B)	1,100.00	2,300.00	3,400.00
Revenue per client (D)	240	1700
Total Revenue (E) = (D) x (A)	26400	78200	104600
Cost of Cleaners (F) = $15 x (C)	16500	34500	51000
Supplies & Other Variable Cost (G) = $4 x (C)	4400	9200	13600
Total variable cost	20900	43700	64600
Contribution Margin	5500	34500	40000
Less: Total Fixed Costs:
SG&A			36000
Other costs			2600
Total Fixed cost			38600
Net Income			1400