Question

Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 85 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below:

	Fixed Cost per Month			Cost per Cruise			Cost per Passenger
Vessel operating costs	$	6,100		$	470.00		$	3.30
Advertising	$	2,600
Administrative costs	$	5,300		$	34.00		$	1.50
Insurance	$	3,600

For example, vessel operating costs should be $6,100 per month plus $470.00 per cruise plus $3.30 per passenger. The company’s sales should average $33.00 per passenger. In July, the company provided 55 cruises for a total of 3,150 passengers.

Required:

Prepare the company’s flexible budget for July.

Alyeski Tours
Flexible Budget
For the Month Ended July 31
Revenue
Expenses:
Vessel operating costs
Advertising
Administrative costs
Insurance
Total expense
Net operating income

Answer 1

Answer:-

Alyeski Tours
Flexible Budget
For the Month ended July 31
Particulars		Amount
		$
Revenue	3150 passengers*$33 per passenger	103950
Less:-Expenses
Vesssel operating costs
Fixed	6100	6100
Variable	(55 cruise*$470 per cruise)+(3150 passenger*$3.30 per passenger	36245
Advertising costs
Fixed		2600
Administrative costs
Fixed	5300	5300
Variable	(55 cruise*$34 per cruise)+(3150 passenger*$1.50 per passenger	6595
Insurance
Fixed	3600	3600
Net Operating Income		43510