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 85 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Fixed Cost per Month 6,500 $ 2,500 Cost per Cruise 474.00 Cost per Passenger $3.10 Vessel operating costs Advertising Administrative costs 5,600 4,000 37.00 $1.50 Insurance For example, vessel operating costs should be $6,500 per month plus $474.00 per cruise plus $3.10 per passenger. The company's sales should average $32.00 per passenger. In July, the company provided 55 cruises for a total of 3,100 passengers. Required: Prepare the company's flexible budget for July.

Answer 1

Flexible budget

Actual cruises	55
Actual passengers	3100
Revenue (3100*32)	99200
Expenses
Vessel operating costs (3100*3.1+474*55+6500)	42180
Advertising	2500
Administrative costs (3100*1.5+37*55+5600)	12285
Insurance	4000
Total expense	60965
Net operating income	38235