14) Bugos Corporation is a service company that measures its output by the numbe

ID: 2513525 • Letter: 1

Question

14) Bugos Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Fixed Element per Month Variable Element per Revenue Employee salaries and wages Travel expenses Other expenses Customer Served S 4,200 $ 900 S 700 S 58,800 S 33,300 When the company prepared its planning budget at the beginning of March, it assumed that 40 customers would have been served. The amount shown for "Employee salaries and wages" in the planning budget for March would have been closest to: A) $91,200 B) $94,800 C) $92,600 D) $102,889

Explanation / Answer

Calculation of Employees’ salaries and wages cost

Particulars

Amount

Variable:

No of customers to be served

Variable salary and wages cost per customer

$900

Total variable employee and wages cost (40*900) (A)

$36,000

Add: Fixed employee and wages cost (B)

$58,800

Total employee and wages cost (C=A+B)

$94,800

Ans

Option (B) $94,800 is correct