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)		300
Revenue ($430.00q)	$	129,000
Expenses:
Wages and salaries ($11,500 + $128.00q)		49,900
Supplies ($4.00q)		1,200
Equipment rental ($2,200 + $23.00q)		9,100
Insurance ($3,900)		3,900
Miscellaneous ($510 + $1.48q)		954
Total expense		65,054
Net operating income	$	63,946

During May, the company’s actual activity was 290 diving-hours.

Required:

Prepare a flexible budget for May. (Round your answers to the nearest whole number.)

Answer 1

• Requirement: Flexible Budget

	WORKING COLUMNs						Flexible Budget
							[C = Fixed + (Var x Actual units)]
	Fixed part	+(	Variable part	x	Actual/Planned units	)
Driving Hours							290
Revenues		(	$             430.00	x	290	)	$124,700
Expenses:
Wages & Salaries	$11,500	+(	$             128.00	x	290	)	$48,620
Supplies	$0	+(	$                  4.00	x	290	)	$1,160
Equipment rentals	$2,200	+(	$               23.00	x	290	)	$8,870
Insurance	$3,900	+(	$                      -	x	290	)	$3,900
Miscellaneous	$510	+(	$                  1.48	x	290	)	$939
Total Expenses	$18,110	+(	$             156.48	x	290	)	$63,489
Net Operating Income							$61,211