Question

Ruozzo Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for July.

	Fixed Element per Month			Variable Element per Customer Served		Actual Total for July
Revenue				$	4,500	$	100,000
Employee salaries and wages	$	43,100		$	900	$	63,300
Travel expenses				$	500	$	11,500
Other expenses	$	36,900				$	37,900

When the company prepared its planning budget at the beginning of July, it assumed that 27 customers would have been served. However, 22 customers were actually served during July.

The “Employee salaries and wages” in the flexible budget for July would have been closest to:

Multiple Choice

• $77,686

• $63,300

• $62,900

• $67,400

Answer 1

Answer: $62,900

Flexible Budget Calculated the Cost at Actual level of Activity

Actual Customers = 22

Employees Salaries and Wages = 22*900+43100 = $62,900