Question

Help Save & Exit SO Bustillo Company operates sight-seeing buses. Management has identified two cost drivers--the number of buses in operation and the number of passengers served that it uses in its budgeting and performance reports. Data concerning the company's cost formulas appear below. Cost per Bus $ 476 Cost per Passenger $ 3 Vehicle operating costs Advertising Administrative costs Insurance Fixed Cost per Month $ 6,800 $ 2,500 $ 5,300 $ 3.900 $ 38 $ 1.5 For example, vehicle operating costs should be $6,800 per month plus $476 per bus plus $3 per passenger. The company's sales revenue should average $32 per passenger. In July, the company operated 45 buses and served a total of 3.200 passengers. How much is the company's flexible budget operating income for July? Multiple Choice $28,220 $46,370 $64,580 < Prev 4 nf 15 HE Next >

Answer 1

​​​​​​Correct ans is option 2  $46370

Explanation and Working

Flexible budget is the budget which changes with change in quantity but fixed cost will remain same . Flexible budget are prepare to compare actual cost with the budgeted cost for actual output.

Total Fixed Budgeted cost = $6800+$2500+$5300+$3900=$18500

Total Variable Cost

Variable per Bus = $(476+38)*No of buses =$514*45

=$23130

Variable cost per Passenger = $(3+1.5)*No of Passenger =$4.5*3200= $14400

Statement of Flexible budget operating income

Sales ($32*3200 passenger)	$102400
Less: Total Budegeted Cost
Variable ($23130+14400)	$37530
Fixed	$18500
Total Operating Income	$46370