The Dawson Corporation uses customers served as its measure of activity. During

Question

The Dawson Corporation uses customers served as its measure of activity. During January, Dawson budgeted for 32,000 customers. However, it actually served 35,000 customers. Dawson uses the following revenue and cost formulas in its budgeting where "Q" is the number of customers served.

Revenue: ($4.20) (Q)

Wages & Salaries: $33,900 + ($1.40) (Q)

Supplies: $0.60 (Q)

Insurance: $10,000

Miscellaneous: $7,200 + ($0.40) (Q)

Dawson reported the following actual results for January:

Revenue………………………..$146,400

Wages & Salaries……………….$80,000

Supplies………………………….$19,700

Insurance………………………….$9,900

Miscellaneous…………………...$20,200

Required:

Calculate the January 31 month ending Net Operating Income for the following situations:

A.        The Planning Budget

B.        The Flexible Budget

C.        The Actual Results

Note: Use the following formula to calculate Net Operating Income:

Net Operating Income = Revenue less Total Expenses

Explanation / Answer

Answer:-A)-

B)-

C)-

Dawson Corporation Planning Budget (Budgeted 32000 Customers) For the month of Ended January 31 Particulars Amount $ Revenue (a) $4.20*32000 customers 134400 Variable expenses:- Wages & Salaries $1.40*32000 customers 44800 Supplies $.60*32000 customers 19200 Miscellenous $.40*32000 customers 12800 Total variable costs (b) 76800 Fixed Expenses Wages & Salaries 33900 Insurance 10000 Miscellenous 7200 Total fixed costs (c) 51100 Net Opreating income d=a-(b+c) 6500

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