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 90 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below:

	Fixed Cost per Month			Cost per Cruise			Cost per Passenger
Vessel operating costs	$	6,200		$	479.00		$	3.20
Advertising	$	2,100
Administrative costs	$	5,800		$	39.00		$	1.50
Insurance	$	3,400

For example, vessel operating costs should be $6,200 per month plus $479.00 per cruise plus $3.20 per passenger. The company’s sales should average $28.00 per passenger. In July, the company provided 57 cruises for a total of 3,150 passengers.

Required:

Prepare the company’s flexible budget for July.

Answer 1

Answer-

Alyeski Tours
Flexible Budget
For the Month ended July 31
Particulars		Amount
		$
Revenue	3150 passengers*$28 per passenger	88200
Less:-Expenses
Vessel operating costs	(57 cruise*$479 per cruise)+(3150 passenger*$3.20 per passenger)+$6200	43583
Advertising costs		2100
Administrative costs	(57 cruise*$39 per cruise)+(3150 passenger*$1.50 per passenger)+$5800	12748
Insurance		3400
Total Expenses		61831
Net Operating Income		26369