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 82 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Fixed Cost per Month Cost per Cruise 475.00 Cost per Passenger 3.50 Vessel operating costs Advertising Administrative costs 6,100 2,900 5,100 3,800 $ 1.50 36.00 Insurance For example, vessel operating costs should be $6,100 per month plus $475.00 per cruise plus $3.50 per passenger. The company's sales should average $32.00 per passenger. In July, the company provided 52 cruises for a total of 3,100 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 0

Answer 1

Flexible budget

Cruises	52
Passenger	3100
Revenue (3100*32)	99200
Expense
Vessel operating cost	41650
Advertising	2900
Administrative costs	11622
Insurance	3800
Total expense	59972
Net operating income	39228