Question

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below:

Puget Sound Divers Planning Budget For the Month Ended May 31
Budgeted diving-hours (q)		350
Revenue ($410.00q)	$	143,500
Expenses:
Wages and salaries ($11,200 + $128.00q)		56,000
Supplies ($4.00q)		1,400
Equipment rental ($2,100 + $22.00q)		9,800
Insurance ($4,100)		4,100
Miscellaneous ($520 + $1.48q)		1,038
Total expense		72,338
Net operating income	$	71,162

During May, the company’s actual activity was 340 diving-hours.

Required:

Prepare a flexible budget for May

Answer 1

Flexible Budget is a Budget which is recognising the difference between fixed,semi variable and variable costs is designed to change in relation to the level of activity attained.

Puget Sound Divers Flexible Budget For the Month Ended May 31
Actual diving-hours (q)		340
Revenue ($410.00q)	$	139,400
Expenses:
Wages and salaries ($11,200 + $128.00q)		54,720
Supplies ($4.00q)		1,360
Equipment rental ($2,100 + $22.00q)		9,580
Insurance ($4,100)		4,100
Miscellaneous ($520 + $1.48q)		1,023
Total expenses		70,783
Net operating income	$	68,617