Question

In: Accounting

Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation...

Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation and the number of passengers served —that it uses in its budgeting and performance reports. Data concerning the company’s cost formulas appear below:

Fixed Cost per Month

Cost per Bus

Cost per Passenger

Vehicle operating costs

$

6,800

$

476

$

3

Advertising

$

2,500

Administrative costs

$

5,300

$

38

$

1.5

Insurance

$

3,900

For example, vehicle operating costs should be $6,800 per month plus $476 per bus plus $3 per passenger. The company’s sales revenue should average $30 per passenger. In July, the company operated 54 buses and served a total of 3,150 passengers. How much is the company’s flexible budget operating income for July?

Multiple Choice

  • $60,431

  • $34,069

  • $32,504

  • $52,546

Solutions

Expert Solution

Revenue 3150*30 94500
Fixed cost
Vehicle operating costs 6800
Advertising 2500
Administrative costs 5300
Insurance 3900
18500
Variable vehicle operating cost per bus 476*54 25704
Variable administrative costs per bus 38*54 2052
Variable vehicle operating cost per passenger 3*3150 9450
Variable administrative costs per passenger 1.5*3150 4725
Flexible budget operating income 34069
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