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 89 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Cost per Cruise $475.00 Fixed Cost per Month $6, 400 $ 2, 100 $5, 700 $3, 800 Cost per Passenger $3.10 Vessel operating costs Advertising Administrative costs Insur nce $34.00 $1.50 For example, vessel operating costs should be $6,400 per month plus $475.00 per cruise plus $3.10 per passenger. The company's sales should average $29.00 per passenger. In July, the company provided 54 cruises for a total of 3,000 passengers. Required Prepare the company's flexible budget for July Alyeski Tours Flexible Budget For the Month Ended July 31 Revenue Expenses Vessel operating costs Advertising Administrative costs Insurance Total expense Net operating income

Explanation / Answer

Flexible Budget Cruises 54 Passengers 3000 Revenue 87000 Expenses: Vessel operating costs 41350 Advertising 2100 Administrative costs 12036 Insurance 3800 Total expense 59286 Net operating income 27714

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