Question

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below:

Puget Sound Divers Planning Budget For the Month Ended May 31
Budgeted diving-hours (q) 350
Revenue ($420.00q) $ 147,000
Expenses:
Wages and salaries ($11,500 $130.00q) 57,000
Supplies ($4.00q) 1,400
Equipment rental ($2,200 $25.00q) 10,950
Insurance ($3,900) 3,900
Miscellaneous ($510 $1.44q) 1,014
Total expense 74,264
Net operating income $ 72,736
Required:
During May, the company’s actual activity was 340 diving-hours. Compute the flexible budget of activity.

Answer 1

operating income 84740.4

Step-by-step explanation:

The flexible budget will work out the numbers for a level of activity of 340 units

Revenue $420 x 340 = 142,800

Wages and salaries $11,500 fixed component + $130 x 340 = 55,700

Supplies $4.00 x 340 = 1,360

Insurnace (fixed) $3,900

Miscellaneous $510 fixed component + $1.44 x 340 = 999,6

Operating Income:

Revenues 142,800

total expenses (58,059.6)

operating income 84740.4