Question

Andrew Sinclair operates a lawn care business. He offers customers a choice of two services. The first service, basic lawn care, includes mowing and trimming of all lawn areas. Andrew bills these customers $37 per hour, and his variable cost for providing this service is $25 per hour. Andrew also offers deluxe lawn care services, which includes flower bed maintenance in addition to basic lawn care. He bills his customers $68 per hour for this service, and his variable cost for providing this service is $32 per hour. Andrew currently spends 1 hour of his time providing deluxe lawn care services for every 4 hours of basic lawn care services. Andrew also incurs $67,200 in fixed costs per year running his business.

What is Andrew’s profit equation? (Use contribution margin per hour to calculate the answer.)

$enter a dollar amount  x + enter an appropriate value (enter an appropriate value  x) - $enter a dollar amount  = Operating income

Answer 1

	Basic lawn care	Deluxe lawn care services
Selling Price	$37	$68
Less: Variable Cost	$25	$32
	$12	$36
Let total time spent for deluxe lawn care services be X and
Let total time spent for basic lawn care services be 4X
So Andrew’s profit equation
[($36 X) + ($12*4X)] - $67,200 = Operating income