Chirico Clinic uses client-visits as its measure of activity. During February, t

Question

Chirico Clinic uses client-visits as its measure of activity. During February, the clinic budgeted for 2,500 client-visits, but its actual level of activity was 2,550 client-visits. The clinic 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 client-visit Revenue ? $52.30 Personnel expenses $29,600 $15.50 Medical supplies 1,300 9.10 Occupancy expenses 8,200 2.50 Administrative expenses 6,000 0.40 Total expenses $45,100 $27.50 Actual results for February: Revenue $138,875 Personnel expenses $70,015 Medical supplies $24,335 Occupancy expenses $14,655 Administrative expenses $6,880 The net operating income in the flexible budget for February would be closest to: $16,900 $23,450 $18,140 $22,539

Explanation / Answer

Computation of Total Budgeted Cost for 2550 Client Particular Variable element per client Visit Total Variable Cost for 2550 Client Fixed Element Per Month Total Cost Personnel Expense $15.50 $39,525.00 $29,600.00 $69,125.00 Medical Supplies $9.10 $23,205.00 $1,300.00 $24,505.00 Occupancy Expense $2.50 $6,375.00 $8,200.00 $14,575.00 Administrative expense $0.40 $1,020.00 $6,000.00 $7,020.00 Total Expense $70,125.00 $45,100.00 $115,225.00 Computation of Net Operating Income for 2550 Client Particular Amount Revenue( $52.30*2550) $133,365.00 Less: Variable cost $70,125.00 Less: Fixed Cost $45,100.00 Net Operating Income $18,140.00

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