Kalinowski Kennel uses tenant-days as its measure of activity; an animal housed

Question

Kalinowski Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During February, the kennel budgeted for 2,300 tenant-days, but its actual level of activity was 2,320 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February:

Data used in budgeting:
Fixed Variable
element element per
per month tenant-day
Revenue....................................... - $36.30
Wages and salaries......................... $ 2,000 $ 5.90
Expendables.................................. 400 13.80
Facility expenses............................ 8,100 4.60
Administrative expenses.................. 6,500 0.10
Total Expenses.............................. $17,000 $24.40

Actual results for February:
Revenue...................................... $83,306
Wages and salaries........................ $16,338
Expendables................................. $33,446
Facility expenses........................... $19,212
Administrative expenses................. $6,602

The net operating income in the flexible budget for February would be closest to:

a. $10,370

b. $10,608

c. $7,642

d. $7,775

Explanation / Answer

Actual level of activity = 2,320 tenant-days. Total Expenses = Fixed : $17,000 Variable: $24.40 Total Expenses =$17,000 + $24.40* 2,320 =$73,608 Revenue = $83,306 Net operating income in the flexible budget = $83,306- $73,608 = $9698 Closest to a. $10,370 Answer : a. $10,370

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