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 (9) 250 Revenue (5489.08) $120,000 Expenses: Wages and salaries ($11,100 + $126.00) 42,600 Supplies ($3.000) 750 Equipment rental ($2,000 + $26.089) 8,500 Insurance ($4,000) 4,000 Miscellaneous ($520 + $1.449) Total expense 56,730 $ 63,270 Net operating income 880 During May, the company's actual activity was 240 diving-hours. Required: Prepare a flexible budget for May (Round your answers to the nearest whole number.)

Answer 1

Answer)

Puget Sound Drivers
Flexible Budget
For the Month Ended May 31
Actual diving-hours	240
Revenue    (A)	$ 115,200
Expenses:
Wages and salaries	$     41,340
Supplies	$           720
Equipment rental	$       8,240
Insurance	$       4,000
Miscellaneous	$           866
Total expense   (B)	$     55,166
Net Operating Income (A-B)	$     60,034

Therefore actual net operating Income for the month of May is $ 60,034.

Working Notes:

Calculation of Revenue

Revenue = Actual Diving hours X $ 480 per diving hour

                  = 240 diving hours X $ 480 per diving hour

                 =$ 115,200    

Calculation of Wages and Salaries expense

Wages and Salaries = $ 11,100 + (Actual Diving hours X $ 126 per diving hour)

                                     = $ 11,100 + (240 diving hours X $ 126 per diving hour)

                                     =$ 11,100 + $ 30,240

                                     =$ 41,340

Calculation of Supplies

Supplies = Actual Diving hours X $ 3 per diving hour

                  = 240 diving hours X $ 3 per diving hour

                 =$ 720

Calculation of Equipment Rental

Equipment Rental = $ 2,000 + (Actual Diving hours X $ 26 per diving hour)

                                  = $ 2,000 + (240 diving hours X $ 26 per diving hour)

                                  =$ 2,000 + $ 6,240

                                  =$ 8,240

Calculation of Insurance

Insurance is a fixed expense and thus will remain at the same level (i.e. $ 4,000) irrespective of the level of output.

Calculation of Miscellaneous expense

Miscellaneous expense = $ 520 + (Actual Diving hours X $ 1.44 per diving hour)

                                            = $ 520 + (240 diving hours X $ 1.44 per diving hour)

                                           =$ 520 + $ 345.60

                                           =$ 865.60 or $ 866 (rounded off).