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) 300 Revenue ($470.00q) $ 141,000 Expenses: Wages and salaries ($11,800 + $126.00q) 49,600 Supplies ($5.00q) 1,500 Equipment rental ($2,400 + $24.00q) 9,600 Insurance ($3,800) 3,800 Miscellaneous ($500 + $1.50q) 950 Total expense 65,450 Net operating income $ 75,550 During May, the company’s actual activity was 290 diving-hours.

Required:
During May, the company’s activity was actually 240 diving-hours. Complete the following flexible budget for that level of activity.

Answer 1

Step-by-step explanation:

The preparation of the following flexible budget for that level of activity is presented below:

Puget Sound Divers

Flexible Budget

For the Month Ended May 31

Sales revenue $112,800 ($470 × 240 diving hours)

Less:

Wages and salaries $42,040 ($11,800 + $126.00 × 240 diving hours)

Supplies $1,200 (240 diving hours × $5)

Equipment rental $8,160 ($2,400 + $24 × 240 diving hours)

Insurance $3,800

Miscellaneous $860 ($500 + $1.50 × 240 diving hours)

Total expenses $56,060

Net operating income $56,740