Question

Exercise 9-5 Prepare a Flexible Budget with More Than One Cost Driver [LO9-5] 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 85 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Cost per Cruise $473.00 Cost per Passenger $ 3.40 Vessel operating costs Advertising Administrative costs Insurance Fixed Cost Per Month $ 6,200 $ 2,800 $ 5,400 $ 3,000 $ 40.00 $ 1.50 For example, vessel operating costs should be $6,200 per month plus $473.00 per cruise plus $3.40 per passenger. The company's sales should average $32.00 per passenger. The company's planning budget for July is based on 52 cruises and 3,100 passengers.

Answer 1

Solution

Alyeski Tours
Flexible Budget
For the Month Ended July 31
Revenue	$ 99,200
Expenses:
Vessel operating costs	$ 41,336*
Advertising	$ 2,800
Administrative costs	$ 12,130**
Insurance	$ 3,000
Total Expenses	$ 59,266
Net Operating Income	$ 39,934

*Vessel operating cost =((3100 x 3.4)+6200)+(52*473)
**Admin cost =((3100 x 1.5)+5400)+(52*40)