Question

Berg Corporation is a service company that measures its output by the number of customers served.
The company has provided the following fixed and variable cost estimates that it uses for budgeting
purposes.
Fixed Element per Month
Variable Element per Customer Served
Revenue
$
4,200
Employee salaries and wages
$
58,800
$
900
Travel expenses
$
700
Other expenses
33,300
When the company prepared its planning budget at the beginning of March, it assumed that 40
customers would have been served. The amount shown for "Employee salaries and wages" in the
planning budget for March would have
been:
a. $91,200.
b. $94,800.
c. $92,600.
d. $102,889.

Answer 1

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Correct option is: b. $94,800
Workings:
		Planning Budget
Customers	(q)	40
Revenue	($4200 X q)	$               1,68,000
Employee's salaries and wages	[$58800 + ($900 X q)]	$                   94,800
Travel expense	($700 X q)	$                   28,000
Other expenses	$                             33,300	$                   33,300
Net Operating Income (loss)		$                   11,900