Karpin Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The
ID: 2504416 • Letter: K
Question
Karpin 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 variable element variable element
per month per guest per jeep
revenue................................ $0 $93 $0
tour guide wages................... $0 $0 $107
vehicle expenses.................. $3100 $8 $73
administrative expenses....... $2500 $3 $0
In July, the company budgeted for 434 guests and 132 jeeps. The actual activity for the month was 459 guests and 137 jeeps.
Required: Prepare the company's flexible budget for the actual level of activity in July.
Explanation / Answer
The flexible amount =
Extra no. of jeeps *variable cost per jeep + extra no. of guests*variable cost per guest
=> (137-132)*(0+107+73+0) + (459-434)*(93+0+8+3)
= 900 + 2600
= $3500
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