Question

Paulis Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During February, the kennel budgeted for 4,100 tenant-days, but its actual level of activity was 4,080 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February:

Data used in budgeting:
Fixed element per month Variable element per tenant-day
Revenue -- $30.60
Wages and salaries $3,100 $6.60
Food and supplies 500 11.40
Facility expenses 8,100 3.60
Administrative expenses 7,900 0.60
Total expenses $19,600 $22.20
Actual results for February:
Revenue $107,880
Wages and salaries $23,510
Food and supplies $36,791
Facility expenses $19,260
Administrative expenses $9,142
1. The net operating income in the planning budget for February would be closest to __________.
Multiple Choice:
O $14,840
O $19,083
O $14,672
O $19,177

Answer 1

The net operating income in the planning budget for February would be closest to $14,840. This is calculated by subtracting the total budgeted expenses from the budgeted revenue, considering both the fixed and variable costs for the budgeted tenant-days.

Step-by-step explanation:

The net operating income in the planning budget for February can be calculated by subtracting the total budgeted expenses from budgeted revenue. The budgeted revenue is the product of the budgeted tenant-days and the per tenant-day revenue. The total budgeted expenses are the sum of the fixed expenses and the product of the budgeted tenant-days and the variable expense per tenant-day.

Budgeted Revenue = 4,100 tenant-days * $30.60/tenant-day = $125,460

Total Budgeted Expenses = Fixed Expenses + (Budgeted Tenant-days * Variable Expense per Tenant-Day)

Total Budgeted Expenses = $19,600 + (4,100 * $22.20) = $19,600 + $91,020 = $110,620

Net Operating Income = Budgeted Revenue - Total Budgeted Expenses

Net Operating Income = $125,460 - $110,620 = $14,840

Answer 2

$19,083

Step-by-step explanation:

Base on the scenario been described in the question, revenue per tenant-day $29.90Total variable expense per tenant-day 20.00 Contribution margin per tenant-day $9.90 Total fixed expense$17,600Net operating income = ($9.90 × 3,400) − $17,600 = $19,083