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 84 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	$	6,700		$	476.00		$	3.10
Advertising	$	3,000
Administrative costs	$	5,900		$	38.00		$	1.50
Insurance	$	3,700

For example, vessel operating costs should be $6,700 per month plus $476.00 per cruise plus $3.10 per passenger. The company’s sales should average $29.00 per passenger. In July, the company provided 53 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

Answer 1

Alyeski Tours
Flexible Budget
For the Month Ended July 31
Actual cruises	53
Actual passengers	3000
Revenue	87000	=3000*29
Expenses:
Vessel operating costs	41228	=6700+(476*53)+(3000*3.10)
Advertising	3000
Administrative costs	12414	=5900+(38*53)+(3000*1.50)
Insurance	3700
Total expense	60342
Net operating income	26658