Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:
Fixed Element per Month |
Variable Element per Customer Served | Actual Total for May |
|||||
Revenue | $ | 5,400 | $ | 203,000 | |||
Employee salaries and wages | $ | 53,000 | $ | 1,400 | $ | 108,500 | |
Travel expenses | $ | 750 | $ | 27,700 | |||
Other expenses | $ | 32,000 | $ | 30,800 | |||
When preparing its planning budget the company estimated that it would serve 35 customers per month; however, during May the company actually served 40 customers.
1. What amount of revenue would be included in Adger’s flexible budget for May?
2. What amount of employee salaries and wages would be included in Adger’s flexible budget for May?
3. What amount of travel expenses would be included in Adger’s flexible budget for May?
4. What amount of other expenses would be included in Adger’s flexible budget for May?
5. What net operating income would appear in Adger’s flexible budget for May?
Answer-1)- The amount of revenue would be included in Adger’s flexible budget for May = $216000.
2)- The amount of employee salaries and wages would be included in Adger’s flexible budget for May= $109000.
3)- The amount of travel expenses would be included in Adger’s flexible budget for May= $30000.
4)- The amount of other expenses would be included in Adger’s flexible budget for May = $32000.
5)- The net operating income would appear in Adger’s flexible budget for May = $45000.
Explanation-
ADGER CORPORATION | ||
Flexible Budget | ||
For the month ended May | ||
Particulars | Flexible Budget | |
$ | ||
Revenue | 40 customer served*$5400 per customer | 216000 |
Less:-Expenses | ||
Employee salaries and wages | (40 customer served*$1400 per customer)+$53000 | 109000 |
Travel expenses | 40 customer served*$750 per customer | 30000 |
Other expenses | 32000 | |
Income from opreations | 45000 |
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