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 88 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	$	6,200	$	473.00	$	3.50
Advertising	$	2,400
Administrative costs	$	5,200	$	31.00	$	1.50
Insurance	$	3,300

  

For example, vessel operating costs should be $6,200 per month plus $473.00 per cruise plus $3.50 per passenger. The company’s sales should average $35.00 per passenger. The company’s planning budget for July is based on 53 cruises and 3,150 passengers.

  

Required:

Complete the company’s planning budget for July.

Revenue

Expenses

Vessel Operation Costs

Advertising

Adminstrative Costs

Insurance

Total Expense

Net Operating Income

Answer 1

Alyeski Tours
Planning Budget
For the month ended July 31
Revenue	110,250	(35*3150)
Expenses:
Vessel Operating Cost	42,294	(6200+473*53+3.5*3150)
Advertising	2,400
Administrative Expense	11,568	(5200+31*53+1.5*3150)
Insurance	3,300
Total Expense	59,562
Net Operating Income	50,688