Adger Corporation is a service company that measures its output based on the num

Question

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.

1. What amount of revenue would be included in Adger’s flexible budget for May

2. What amount of employee salaries and wages would be included in Adger’s flexible budget for May?

3. What amount of travel expenses would be included in Adger’s flexible budget for May?

4. What amount of other expenses would be included in Adger’s flexible budget for May?

Fixed Element
per Month Variable Element per Customer Served Actual Total
for May Revenue $ 5,800 $ 189,500 Employee salaries and wages $ 54,000 $ 1,500 $ 105,900 Travel expenses $ 800 $ 25,600 Other expenses $ 33,000 $ 31,700

Explanation / Answer

1) Revenue in flexible budget = 5800*35 = 203000

2) Employee salaries and wages in flexible budget = (1500*35+54000) = 106500

3) Travel expense in flexible budget = 800*35 = 28000

4) Other expenses in flexible budget = 33000

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