Question

Ordway Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During June, the kennel budgeted for 2,100 tenant-days, but its actual level of activity was 2,070 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for June:

Data used in budgeting:

	Fixed element per month			Variable element per tenant-day
Revenue		−		$	35.40
Wages and salaries	$	3,200		$	6.80
Food and supplies		500			9.90
Facility expenses		9,300			4.80
Administrative expenses		6,200			0.20
Total expenses	$	19,200		$	21.70

Actual results for June:

Revenue	$	73,868
Wages and salaries	$	17,116
Food and supplies	$	21,883
Facility expenses	$	19,656
Administrative expenses	$	6,624

The wages and salaries in the planning budget for June would be closest to:

A) $17,480

B) $17,116

C) $17,364

D) $17,276

Answer 1

Answer:

Correct answer is:

A) $17,480

Explanation:

Data used in budgeting:

	Fixed element per month			Variable element per tenant-day
Wages and salaries	$	3,200		$	6.80

During June, the kennel budgeted for 2,100 tenant-days.

Hence:

Wages and salaries in the planning budget for June = Fixed element per month+ budgeted tenant-days * Variable element per tenant-day

= $3,200 + 2,100 * $6.80

= $17,480

Wages and salaries in the planning budget for June = $17,480

As such option A is correct and other options B, C and D are incorrect.