Required information The Foundational 15 [LO9-1, LO9-2, LO9-3] [The following in

Question

Required information The Foundational 15 [LO9-1, LO9-2, LO9-3] [The following information applies to the questions displayed below.] Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below: Fixed Element Variable Element Actual per Customer Served $ 6,000 $ 1,900 $ 500 Total for May $ 194,500 123,500 $ 14,700 $ 35,300 per Revenue Employee salaries and wages Travel expenses Other expenses Month $58,000 $37,000 When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers

Explanation / Answer

(1). Amount of revenue included in flexible budget = $210000

(2). Amount of employee salaries and wages included in flexible budget = $124500

(3). Amount of travel expenses included in flexible budget = $17500

(4). Amount of other expenses included in flexible budget = $37000

(5). Amount of net operating income in flexible budget = $31000

Explanation;

Let’s prepare flexible budget for getting answers of all questions;

Flexible Budget (At actual customers 35)

Revenue ($6000 * 35)

$210000

Less;

Employee salaries & wages;

Fixed

$58000

Variable (35 * $1900)

$66500

($124500)

Travel expenses (35 * $500)

($17500)

Other expenses

($37000)

Net operating income

$31000

Flexible Budget (At actual customers 35)

Revenue ($6000 * 35)

$210000

Less;

Employee salaries & wages;

Fixed

$58000

Variable (35 * $1900)

$66500

($124500)

Travel expenses (35 * $500)

($17500)

Other expenses

($37000)

Net operating income

$31000

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