Velazques Jeep Tours operates jeep tours in the heart of the Colorado Rockies. T

Question

Velazques Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting Fixed element per month Variable element per guest $ 95 Variable element per jeep Revenue Tour guide wages Vehicle expenses Administrative expenses $100 $ 61 $ 4,100 $ 1,100 In March, the company budgeted for 361 guests and 131 jeeps. The company's income statement showing the actual results for the month appears below: Velazques Jeep Tours Income Statement For the Month Ended March 31 Actual guests Actual jeeps 352 133 Revenue $33,380 Expenses Tour guide wages Vehicle expenses Administrative expenses 13,050 15,149 1,452 Total expense 29,651 Net operating income $ 3,729

Explanation / Answer

Flexible budget

Activity variances

Revenues 352*95 $33,440 Expenses: Tour guide wages 100*133 $13,300 Vechicle expense(4100+8*361+61*131) 15,029 Administratieve expense (1100+361)     1,452 Total expense $29,781 Net operating income $3659

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