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:
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Puget Sound Divers Planning Budget For the Month Ended May 31 |
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| Budgeted diving-hours (q) | 200 | |
| Revenue ($430.00q) | $ | 86,000 |
| Expenses: | ||
| Wages and salaries ($11,600 + $126.00q) | 36,800 | |
| Supplies ($5.00q) | 1,000 | |
| Equipment rental ($2,100 + $20.00q) | 6,100 | |
| Insurance ($3,900) | 3,900 | |
| Miscellaneous ($530 + $1.42q) | 814 | |
| Total expense | 48,614 | |
| Net operating income | $ | 37,386 |
During May, the company’s actual activity was 190 diving-hours.
Required:
Prepare a flexible budget for May.
| Puget Sound Divers | |||
| Flexible Budget for May | |||
| Per Diving Hour | Flexible Budget | ||
| Actual Diving Hours | 190 | ||
| Revenue | $430.00 | $81,700.00 | |
| Less : Variable Expenses | |||
| - Wages and Salaries | $126.00 | $23,940.00 | |
| - Supplies | $5.00 | $950.00 | |
| - Equipment Rental | $20.00 | $3,800.00 | |
| - Misecellaneous | $1.42 | $269.80 | |
| Total Variable Expenses | $152.42 | $28,959.80 | |
| Contribution Margin | $277.58 | $52,740.20 | |
| Less : Fixed Expenses | |||
| - Wages and Salaries | $11,600.00 | ||
| - Equipment Rental | $2,100.00 | ||
| - Insurance | $3,900.00 | ||
| - Misecellaneous | $530.00 | ||
| Total Fixed Expenses | $18,130.00 | ||
| Net Operating Income | $34,610.20 | ||
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