Puget Sound Divers is a company that provides diving services such as underwater

Question

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below:

During May, the company’s actual activity was 190 diving-hours.

Required:

Prepare a flexible budget for May.

Puget Sound Divers
Planning Budget
For the Month Ended May 31 Budgeted diving-hours (q) 200 Revenue ($430.00q) $ 86,000 Expenses: Wages and salaries ($11,600 + $126.00q) 36,800 Supplies ($5.00q) 1,000 Equipment rental ($2,100 + $20.00q) 6,100 Insurance ($3,900) 3,900 Miscellaneous ($530 + $1.42q) 814 Total expense 48,614 Net operating income $ 37,386

Explanation / Answer

Puget Sound Divers Flexible Budget for May Per Diving Hour Flexible Budget Actual Diving Hours 190 Revenue $430.00 $81,700.00 Less : Variable Expenses - Wages and Salaries $126.00 $23,940.00 - Supplies $5.00 $950.00 - Equipment Rental $20.00 $3,800.00 - Misecellaneous $1.42 $269.80 Total Variable Expenses $152.42 $28,959.80 Contribution Margin $277.58 $52,740.20 Less : Fixed Expenses - Wages and Salaries $11,600.00 - Equipment Rental $2,100.00 - Insurance $3,900.00 - Misecellaneous $530.00 Total Fixed Expenses $18,130.00 Net Operating Income $34,610.20

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