Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat
ID: 2566947 • Letter: A
Question
Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 84 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below:
Fixed Cost per Month Cost per Cruise Cost per Passenger
Vessel operating costs $ 6,700 $ 474.00 $ 3.10
Advertising $ 2,300 0 0
Administrative costs $ 5,300 $ 31.00 $ 1.50
Insurance $ 3,700 0 0
For example, vessel operating costs should be $6,700 per month plus $474.00 per cruise plus $3.10 per passenger. The company’s sales should average $30.00 per passenger. The company’s planning budget for July is based on 53 cruises and 3,200 passengers. Required: Complete the company’s planning budget for July.
Revenue
Expenses:
Vessel operating costs
Advertising
Administrative Costs
Insurance
Total Expense
Net Operating Income
Explanation / Answer
Aleyski Tours Planning Budget Fo the month of July Amount Revenue ($30.00 * 3,200) $ 96,000 Expenses: Vessel Operating Cost $6,700 + ($474 * 53) + ($3.10 * 3,200) $ 41,742 Advertising ($2,300) $ 2,300 Administrative Costs $5,300 + ($31 * 53) + ($1.50 * 3,200) $ 11,743 Insurance ($3,700) $ 3,700 Total Expenses $ 59,485 Net Operating Income (Revenue - Total Expenses) $ 36,515
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