Question

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)
March		600			0.6
April		550			0.9
May		1,450			1.5
June		1,400			2.3
July		1,700			3.3
August		1,350			2.3

The average price charged for a service call is $50. 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.

Required:

What are Varmit-B-Gone’s expected cash receipts for May, June, July, and August?

Answer 1

Answer:

Particulars	May	June	July	August
Total cash receipts	$   48,915.00	$115,530.00	$189,450.00	$227,755.00

Explanation:

Particulars	March	April	May	June	July	August
Subscribers (A)	600.00	550.00	1,450.00	1,400.00	1,700.00	1,350.00
Service calls per subscriber (B)	0.6	0.9	1.5	2.3	3.3	2.3
Average price C)	$        50.00	$        50.00	$          50.00	$          50.00	$          50.00	$          50.00
Total sales (A*B*C)	$18,000.00	$24,750.00	$108,750.00	$161,000.00	$280,500.00	$155,250.00
30% collection	$   5,400.00	$   7,425.00	$   32,625.00	$   48,300.00	$   84,150.00	$   46,575.00
60% collection		$ 10,800.00	$   14,850.00	$   65,250.00	$   96,600.00	$ 168,300.00
8% collection			$     1,440.00	$     1,980.00	$     8,700.00	$   12,880.00
Total collection	$   5,400.00	$18,225.00	$   48,915.00	$115,530.00	$189,450.00	$227,755.00

In case of any doubt, please comment.