Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat

Question

Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers-the number of cruises and the number of passengers that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 88 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below Fixed Cost Cost per Cost per Per Month Cruise Passenge 6,000 $480.00 $ 3.20 Vessel operating costs Advertising Administrative costs Insurance 2,600 $ 5,500 $ 32.00 $1.50 $ 3,300 For example, vessel operating costs should be $6,000 per month plus $480 00 per cruise plus $3.20 per passenger. The company's sales should average $28.00 per passenger. The company's planning budget for July is based on 55 cruises and 3,150 passengers Required: Complete the company's planning budget for July Alyeski Tours Planning Budget For the Month Ended July 31 Revenue Expenses

Explanation / Answer

Solution: Alyeski Tours Planning Budget For the Month Ended July 31 Revenue 88,200 Expenses: Vessel operating costs 42,480 Advertising 2,600 Administrative costs 11,985 Insurance 3,300 Total expense 60,365 Net operating income 27,835 Working Notes: Alyeski Tours Planning Budget For the Month Ended July 31 Revenue 88,200 a [budgeted passenger x price per passenger] [3,150 x $28 = ] Expenses: Vessel operating costs 42,480 b [fixed cost +budgeted cruises x cost per cruises + budgeted passenger x cost per passenger] [$6000 + (480 x 55) + (3150 x $3.20)] Advertising 2,600 c Administrative costs 11,985 d [fixed cost +budgeted cruises x cost per cruises + budgeted passenger x cost per passenger] [$5500 + (32 x 55) + (3150 x $1.5)] Insurance 3,300 e Total expense 60,365 f=b+c+d Net operating income 27,835 g=a-f Please feel free to ask if anything about above solution in comment section of the question.

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