Puget Sound Divers is a company that provides diving services such as underwater

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:

During May, the company’s activity was actually 290 diving-hours. Complete the following flexible budget for that level of activity. (Round your answers to nearest whole dollar.)

Puget Sound Divers
Planning Budget
For the Month Ended May 31   Budgeted diving-hours (q) 300    Revenue ($460.00q) $ 138,000   Expenses:        Wages and salaries ($11,800 + $128.00q) 50,200        Supplies ($6.00q) 1,800        Equipment rental ($2,500 + $21.00q) 8,800         Insurance ($3,900) 3,900        Miscellaneous ($530 + $1.44q) 962   Total expense 65,662   Net operating income $ 72,338 Required:

During May, the company’s activity was actually 290 diving-hours. Complete the following flexible budget for that level of activity. (Round your answers to nearest whole dollar.)

Puget Sound Divers Flexible Budget For the Month Ended May 31 Revenue Expenses: Wages and salaries Supplies Equipment rental Insurance Miscellaneous Total expense Net operating income

Explanation / Answer

Solution:

Flexible Budget is a budget prepared by taking the actual activity level achieved but at standard cost/price. It is useful to compare the budget with actual level.

q is taken as actual level of activity i.e. 290 diving hours and all the below calculation is based on standard price given in the question.

Puget Sound Drivers

Flexible Budget

For the Month Ended May 31

Flexible Budget

Revenue ($460*290)

$133,400

Expenses:

Wages and salaries ($11,800 + 128*290)

$48,920

Supplies (6*290)

$1,740

Equipment Rental ($2,500 + $21*290)

$8,590

Insurance ($3,900)

$3,900

Miscellaneous ($530 + 1.44*290)

$948

Total Expense

$64,098

Net Operating Income

$69,302

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Puget Sound Drivers

Flexible Budget

For the Month Ended May 31

Flexible Budget

Revenue ($460*290)

$133,400

Expenses:

Wages and salaries ($11,800 + 128*290)

$48,920

Supplies (6*290)

$1,740

Equipment Rental ($2,500 + $21*290)

$8,590

Insurance ($3,900)

$3,900

Miscellaneous ($530 + 1.44*290)

$948

Total Expense

$64,098

Net Operating Income

$69,302

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