Fager Clinic uses client-visits as its measure of activity. During February, the clinic budgeted for 2,200 client-visits, but its actual level of activity was 2,250 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February:Data used in budgeting: Actual results for February:
The medical supplies in the flexible budget for February would be closest to:
A) $29,436
B) $30,789
C) $29,325
D) $28,700

Question

Fager Clinic uses client-visits as its measure of activity. During February, the clinic budgeted for 2,200 client-visits, but its actual level of activity was 2,250 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February:Data used in budgeting:  Actual results for February:
 The medical supplies in the flexible budget for February would be closest to:
A) $29,436 
B) $30,789 
C) $29,325 
D) $28,700

Quizplus · Accepted Answer

The formula for medical supplies in the flexible budget is:
$4.50 × Number of client-visits

Using the actual level of activity of 2,250 client-visits for February, the flexible budget for medical supplies would be:
$4.50 × 2,250 = $10,125

However, the actual amount spent on medical supplies in February was $19,725.

To find the flexible budget amount for medical supplies that corresponds to the actual level of activity, we can use the flexible budget formula:
Flexible budget amount = Budgeted amount + (Budgeted amount × (Actual level of activity - Budgeted level of activity) ÷ Budgeted level of activity)

Plugging in the numbers, we get:
Flexible budget amount = $29,250 + ($29,250 × (2,250 - 2,200) ÷ 2,200)
Flexible budget amount = $29,325

Therefore, the closest option to the actual amount spent on medical supplies in February is option C, $29,325.

Fager Clinic Uses Client-Visits as Its Measure of Activity