Question

Virgen Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During May, the kennel budgeted for 3,700 tenant-days, but its actual level of activity was 3,690 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May:

	Fixed Element per Month			Variable element per tenant-day
Revenue		-		$	26.40
Wages and salaries	$	2,500		$	6.10
Food and supplies		1,300			9.70
Facility expenses		8,600			2.60
Administrative expenses		6,800			0.40
Total expenses	$	19,200		$	18.80

Actual results for May:

Revenue	$	92,626
Wages and salaries	$	23,919
Food and supplies	$	37,833
Facility expenses	$	18,594
Administrative expenses	$	8,386

The administrative expenses in the planning budget for May would be closest to:

Multiple Choice

$8,386

$8,409

$8,280

$8,276

Answer 1

Budgeted administrative exp.

= fixed element + variable element

= $6,800 + 3,700 x $.40

= $8,280