Question

Exercise 8-1 Prepare a Flexible Budget [LO8-1]

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:

  

Puget Sound Divers Planning Budget For the Month Ended May 31
Budgeted diving-hours (q)		350
Revenue ($420.00q)	$	147,000
Expenses:
Wages and salaries ($11,400 + $130.00q)		56,900
Supplies ($4.00q)		1,400
Equipment rental ($2,200 + $22.00q)		9,900
Insurance ($4,000)		4,000
Miscellaneous ($510 + $1.50q)		1,035
Total expense		73,235
Net operating income	$	73,765

  

Required:

During May, the company’s activity was actually 340 diving-hours. Complete the following flexible budget for that level of activity. (Round your answers to nearest whole dollar.)

Answer 1

	Puget Sound Divers
	Planning Budget
	For the Month Ended May 31
		PU/FC	Amount
	Budgeted Diving Hours		350
	Revenue	420	147000
	Expense:
	Wages & Salaries	(11400+130)	56900
	Supplies	4.00	1400
	Equipment Rental	(2200+22)	9900
	Insurance	4000	4000
	Misc	(510+1.50)	1035
	Total Expense		73235
	Net Operating Income		73765
	Flexible Budget:
	Puget Sound Divers
	Planning Budget
	For the Month Ended May 31
		PU/FC	Amount		Explanation
	Budgeted Diving Hours		340
	Revenue	420	142800		340*420
	Expense:
	Wages & Salaries	(11400+130)	55600		11400+(340*130)
	Supplies	4.00	1360		340*4
	Equipment Rental	(2200+22)	9680		2200+(340*22)
	Insurance	4000	4000		4000
	Misc	(510+1.50)	1020		510+(340*1.50)
	Total Expense		71660
	Net Operating Income		71140