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 81 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Cost per Passenger $ 3.40 Vessel operating costs Advertising Administrative costs Insurance Fixed Cost per Month Cost per Cruise $ 6,300 $ 470.00 $ 2,300 $ 5,100 $ 33.00 $ 3,300 $ 1.50 For example, vessel operating costs should be $6,300 per month plus $470.00 per cruise plus $3.40 per passenger. The company's sales should average $29.00 per passenger. In July, the company provided 50 cruises for a total of 3,200 passengers. Required: Prepare the company's flexible budget for July.

Answer 1

Flexible budget
Actual cruises	50
Actual passengers	3200
Revenue	92800	=3200*29
Expenses:
Vessel operating costs	40680	=6300+(470*50)+(3200*3.4)
Advertising	2300
Administrative costs	11550	=5100+(33*50)+(3200*1.5)
Insurance	3300
Total expense	57830
Net Operating income	34970