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Question - Plentygood Company provides two levels of advising services. The costs below are computed at the average monthly volume of 5,000 advising hours for each type of service.
Basic
Deluxe
Revenues per hour
275
590
Variable cost per hour
115
180
Common fixed costs per hour
42
276
1. What is the contribution margin per hour for the Basic service?
2. What is the contribution margin per hour for the Deluxe service?
3. At this level of activity, what is the net income per hour for the Basic service?
4. At this level of activity, what is the net income per hour for the Deluxe service?
5. Which service should Plentygood try to promote if more opportunity exists in both areas? Type Deluxe or Basic
6. By how much will income change if 100 additional Deluxe advising hours are generated next month?
7. If Basic advising hours double next month, what will be the net income per hour for the Basic service?
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