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 (q)		100
Revenue ($365.00q)	$	36,500
Expenses:
Wages and salaries ($8,000 + $125.00q)		20,500
Supplies ($3.00q)		300
Equipment rental ($1,800 + $32.00q)		5,000
Insurance ($3,400)		3,400
Miscellaneous ($630 + $1.80q)		810
Total expense		30,010
Net operating income	$	6,490

During May, the company’s actual activity was 105 diving-hours.

Required:

Prepare a flexible budget for May.

Answer 1

Prepare a flexible budget for May. Puget Sound Divers Flexible Budget For the Month Ended May 31 Actual diving-hours 105 $38,325 Revenue Expenses: Wages and salaries Supplies Equipment rental Insurance Miscellaneous Total expense Net operating income 21,125 315 5,160 3,400 819 30,819 $7,506

Explanation: Revenue ($365.00 x 105 diving-hours) = Wages and salaries [$8,000 + ($125.00 x 105 diving-hours)] = Supplies ($3.00 * 105 diving-hours) = Equipment rental ($1,800 + ($32.00 x 105 diving-hours)] = Insurance ($3,400) = Miscellaneous ($630 + ($1.80 * 105 diving-hours)] = $38,325 $21,125 $315 $5,160 $3,400 $819 Puget Sound Divers Flexible Budget For the Month Ended May 31 Actual diving-hours (q) 105 $38,325 Revenue ($365.00q) Expenses: Wages and salaries ($8,000 + $125.00q) Supplies ($3.00q) Equipment rental ($1,800 + $32.00q) Insurance ($3,400) 21,125 315 5,160 3,400

Miscellaneous ($630 + $1.80q) Total expense Net operating income 819) 30,819 $7,506