An unfavorable spe l of the above may appear on a flexible budget performance re

Question

An unfavorable spe l of the above may appear on a flexible budget performance report Corporation is an oil well service company that measures its output by the number of wells serviced. 5. Sathre Corporation is an ol wel service compast estimates that it uses for budgeting purposes. he company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Variable Fixed Element per Month Element per Well Serviced Revenue Employee salaries and wages Servicing materials.. Other expenses... $4,500 $56,400 $900 $700 $35,400 When the company prepared its planning budget at the beginning of December, it assumed that 34 wells would have been serviced. However, 32 wells were actually serviced during December. The "Employee salaries and wages" in the flexible budget for December would have been closest to: A) $87,000 B) $84,600 C) $85,200 D) $89,888

Explanation / Answer

Employees salaries and wages in the flexible budget = $56,400 + ($900 x 32 wells)

.....................................................................................= $85,200

Hence the correct answer is Option C i.e. $85,200

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