Gator Divers is a company that provides diving services such as underwater ship

Question

Gator Divers is a company that provides diving services such as underwater ship repairs to clients in Tampa Bay area. The company’s planning budget for March appears below:

Gator Divers
Planning Budget
For the Month Ended March 31
Budgeted diving-hours (q) 200
Revenue ($380.00q) $76,000

Expenses:
Wages and salaries ($12,000 + $130.00q) 38,000
Supplies ($5.00q) 1,000
Equipment rental ($2,500 + $26.00q) 7,700
Insurance ($4,200) 4,200
Miscellaneous ($540 + 1.50q) 840
Total expense 51,740
Net operating income $24,260

Required:
During March, the company’s activity was actually 190 diving-hours. Prepare a flexible budget for that level of activity.

Explanation / Answer

In the above problem ,only Supplies variable . All the other are mixed expenses except for insurance which is a Fixed Expense. For Mixed Expenses , the formula is (Variable Expense * Level of Activity ) + Fixed Expenses . Hence for 190 level of activity , the Budgeted Income Statement is : Revenue 72,200.00 Wages and Salaries (36,700.00) Supplies (950.00) Equipment Rental (7,440.00) Insurance (4,200.00) Miscellaneous Expenses (825.00) Total Expenses (50,115.00) Net Income 22,085.00 Revenue 72,200.00 Wages and Salaries (36,700.00) Supplies (950.00) Equipment Rental (7,440.00) Insurance (4,200.00) Miscellaneous Expenses (825.00) Total Expenses (50,115.00) Net Income 22,085.00

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