Zenon Kennel uses tenant-days as its measure of activity; an animal housed in th

Question

Zenon Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During July, the kennel budgeted for 3,470 tenant-days, but its actual level of activity was 3,430 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for July:

Data used in budgeting:

Actual results for July:

The facility expenses in the flexible budget for July would be closest to:

a. $37,625

b. $37,429

c. $37,556

d. $38,166

Fixed element per month Variable element per tenant-day Revenue $ 36.10 Wages and salaries $ 3,450 $ 6.80 Food and supplies 1,185 11.60 Facility expenses 8,960 8.30 Administrative expenses 7,060 2.10 Total expenses $ 20,655 $ 28.80

Explanation / Answer

Facility expenses In the flexible budget = Fixed element + (Variable element * actual level of activity

Facility expenses In the flexible budget = $8,960 + ($8.30 * 3,430)

Facility expenses In the flexible budget = $37,429

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