Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat
ID: 2511294 • Letter: A
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:
For example, vessel operating costs should be $6,100 per month plus $473.00 per cruise plus $3.30 per passenger. The company’s sales should average $34.00 per passenger. In July, the company provided 55 cruises for a total of 3,050 passengers.
Required:
Prepare the company’s flexible budget for July.
Fixed Cost per Month Cost per Cruise Cost per Passenger Vessel operating costs $ 6,100 $ 473.00 $ 3.30 Advertising $ 2,100 Administrative costs $ 5,400 $ 36.00 $ 1.50 Insurance $ 3,600Explanation / Answer
Alyeski Tours
Flexible Budget for July
Revenue
$ 103,700
Expenses
Vessel operating cost
$ 42,180
Advertising
$ 2,100
Administrative cost
$ 11,955
Insurance
$ 3,600
Total expenses
$ 59,835
Net operating income
$ 43,865
Explanation:
Budgeted revenue = Sales per passenger x No. of passenger = $ 34 x 3,050 = $ 103,700
Vessel operating cost = $ 6,100 + ($ 473 x 55) + ($ 3.30 x 3,050)
= $ 6,100 + $ 26,015 + $ 10,065 = $ 42,180
Administrative cost = $ 5,400 + ($ 36 x 55) + ($ 1.50 x 3,050)
= $ 5,400 + $ 1,980 + $ 4,575 = $ 11,955
Alyeski Tours
Flexible Budget for July
Revenue
$ 103,700
Expenses
Vessel operating cost
$ 42,180
Advertising
$ 2,100
Administrative cost
$ 11,955
Insurance
$ 3,600
Total expenses
$ 59,835
Net operating income
$ 43,865
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