60.1K

Verified Solution

Link Copied!

Paradise Pool Cleaning Service provides pool cleaning services to residential customers. The company has three employees, each assigned to specific customers. The

company considers each employee's territory as a business segment. The company incurs variable costs that include the employees' wages, pool chemicals, and gas for the

service vans. Fixed costs include depreciation on the service vans. Following is the income statement for the month of July:

$($Click the icon to view the income statement.$)$

Read the requirements.

Requirement $1.$ Calculate the contribution margin ratio for each business segment.

Requirement $2.$ The business segments had the following numbers of customers: Byson, $100$; McMillian, $80$; and Freezy, $110.$ Compute the service revenue per customer,

variable cost per customer, and contribution margin per customer for each business segment.

Data table

vas most profitable. How might the various reasons affect the Requirement $3.$ Which business segment was most profitable? List some possible reasons why this segment was most profitable. How might the various reasons affect the

company in the long term?

The

business segment was the most profitable because the

Possible reasons for the profitability of this business segment include the following: $($Select all that apply.$)$

A$.$ Lower employee wages in the most profitable business segment

B$.$ Reducing the amount of pool chemicals used in service calls for the most profitable business segment

C$.$ Lengthy routes with longer drive times allowing fewer customers to be served in the most profitable business segment

D$.$ Higher revenue per customer in the most profitable business segment

E$.$ Employees in the most profitable business segment cutting corners when performing service calls

F$.$ Higher employee wages in the most profitable business segment

G$.$ Better routes with shorter drive times allowing more customers to be served in the most profitable business segment

H$.$ Lower revenue per customer in the most profitable business segment

How might the various reasons affect the company in the long term?

The possible side effects of the items identified in the preceding step could be $($Select all that apply.$)$

A$.$ highly compensated employees resulting in an increase in contribution margin.

B$.$ dissatisfied customers because of inadequate service.

C$.$ increased employee turnover because of low wages.

D$.$ increased service costs because of reduced pool chemical usage causing poor water quality and additional service calls.

E$.$ less fuel and maintenance costs because of efficient routes.

F$.$ less fuel and maintenance costs because of lengthier routes.

G$.$ increased customer base due to competitive service prices.

Show all imagesShow all images

Answer & Explanation Solved by verified expert

See Answer