Leaphart Kennel uses tenant-days as its measure of activity; an animal housed in

Question

Leaphart 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 May, the kennel budgeted for 2,800 tenant-days, but its actual level of activity was 2,840 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: Fixed element per month Variable element per tenant-day Revenue ? $31.10 Wages and salaries $3,600 $5.40 Food and supplies 700 12.40 Facility expenses 9,100 2.00 Administrative expenses 6,200 0.40 Total expenses $19,600 $20.20 The wages and salaries in the planning budget for May would be closest to: $18,344 $18,606 $18,720 $18,936

Explanation / Answer

Solution:

Planned Budget is the master budget prepared by the company at the beginning of the period by taking the estimated activities and estimated cost for the period.

Wages and Salaries in the planning budget = (Planned Tenant days 2800 * 5.40) + Fixed 3600

= $15,120 + $3,600

= $18,720

Hence, the correct option is $18,720

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