Question

Mcinerney Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting:

	Fixed element per month			Variable element per guest			Variable element per jeep
Revenue	$	0		$	96		$	0
Tour guide wages	$	0		$	0		$	119
Vehicle expenses	$	3,950		$	9		$	62
Administrative expenses	$	2,650		$	2		$	0

In October, the company budgeted for 326 guests and 92 jeeps. The actual activity for the month was 345 guests and 100 jeeps.

Required:

Prepare the company's flexible budget for the actual level of activity in October.

Answer 1

Mcinerney Jeep Tours
Flexible Budget
Particulars	Flexible budget
Actual Guests	345
Actual Jeep	100
Revenue (345 ×$96)	$33,120
Expenses:
Tour Guide wages (100 × $119)	$11,900
Vehicle expenses (see below-note-1)	$13,255
Administrative expenses (see below-note 2)	$3,340
Total expenses	$28,495
Net Operating Income (Revenue - Total expenses)	$4,625

Explanation:-

Note-1)
Fixed expense	$3,950
Variable expense on guest basis (345 ×$9)	$3,105
Variable expense on jeep basis (100 × $62)	$6,200
Total vehicle expenses	$13,255

Note-2)
Fixed expense	$2,650
Variable expense on guest basis (345 × $2)	$690
Total administrative expenses	$3,340