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 ($390.00q) $ 136,500 Expenses: Wages and salaries ($11,100 + $120.00q) 53,100 Supplies ($5.00q) 1,750 Equipment rental ($2,500 + $25.00q) 11,250 Insurance ($4,100) 4,100 Miscellaneous ($520 + $1.42q) 1,017 Total expense 71,217 Net operating income $ 65,283 During May, the company’s actual activity was 340 diving-hours. Required: Prepare a flexible budget for May. (Round your answers to the nearest whole number.)

Answer 1

Puget Sound Divers

Puget Sound Divers Planning and Flexible Budgets

For the Month Ended May 31

Planning Flexible

Budget Budget

Budgeted diving-hours (q) 350 340

Revenue ($390.00q) $ 136,500 $132,600

Expenses:

Wages and salaries 53,100 51,900

Supplies ($5.00q) 1,750 1,700

Equipment rental 11,250 11,000

Insurance ($4,100) 4,100 4,100

Miscellaneous 1,017 1,003

Total expense 71,217 69,703

Net operating income $ 65,283 $ 62,897

Step-by-step explanation:

a) Data and Calculations:

Puget Sound Divers Planning Budget

For the Month Ended May 31

Budgeted diving-hours (q) 350

Revenue ($390.00q) $ 136,500

Expenses:

Wages and salaries ($11,100 + $120.00q) 53,100

Supplies ($5.00q) 1,750

Equipment rental ($2,500 + $25.00q) 11,250

Insurance ($4,100) 4,100

Miscellaneous ($520 + $1.42q) 1,017

Total expense 71,217

Net operating income $ 65,283

Flexing the budget with actual activity of 340:

Revenue ($390.00q) $ 136,500/350 * 340 = $132,600

Expenses:

Wages and salaries ($11,100 + $120.00 * 340) = $51,900

Supplies ($5.00q) 1,750/350 * 340 = $1,700

Equipment rental ($2,500 + $25.00 * 340 = $11,000

Miscellaneous ($520 + $1.42 * 340 = $1,003