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:

Puget Sound Divers Planning Budget For the Month Ended May 31
Budgeted diving-hours (q)		100
Revenue ($365.00q)	$	36,500
Expenses:
Wages and salaries ($8,000 + $125.00q)		20,500
Supplies ($3.00q)		300
Equipment rental ($1,800 + $32.00q)		5,000
Insurance ($3,400)		3,400
Miscellaneous ($630 + $1.80q)		810
Total expense		30,010
Net operating income	$	6,490

During May, the company’s actual activity was 105 diving-hours.

Required:

Prepare a flexible budget for May.

Answer 1

Solution

Puget Sound Divers
Flexible Budget
For the Month Ended May 31
Actual diving hours	105
Revenue	$      38,325
Expenses:
Wages and salaries	$      21,125
Supplies	$          315
Equipment rental	$        5,160
Insurance	$        3,400
Miscellaneous	$          819
Total expense	$      30,819
Net operating income	$        7,506

Working

		A= Variable portion	B= Fixed portion	C= Units	D=(C x A)+B
Revenue		365		105	$      38,325
Expenses:				105
Wages and salaries		125	8000	105	$      21,125
Supplies		3	0	105	$          315
Equipment rental		32	1800	105	$        5,160
Insurance		0	3400	105	$        3,400
Miscellaneous		1.8	630	105	$          819
Total expense				105	$      30,819
Net operating income				105	$        7,506