Zelenka Clinic uses client-visits as its measure of activity. During June, the clinic budgeted for 2,700 client-visits, but its actual level of activity was 2,710 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting for June:

-The net operating income in the planning budget for June would be closest to:
A)$18,384
B)$16,466
C)$16,220
D)$18,248

Question

Zelenka Clinic uses client-visits as its measure of activity. During June, the clinic budgeted for 2,700 client-visits, but its actual level of activity was 2,710 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting for June:

-The net operating income in the planning budget for June would be closest to:

-The net operating income in the planning budget for June would be closest to:
A)$18,384 
B)$16,466 
C)$16,220 
D)$18,248

Quizplus · Accepted Answer

To calculate net operating income, we need to subtract the total expenses from the total revenue. Looking at the planning budget:
Revenue: 
Sales $58,000 
Expenses: 
Direct materials $17,500 
Direct labor $13,500 
Variable overhead $8,000 
Fixed overhead $3,000 
Total Expenses $42,000

Net operating income = $58,000 - $42,000 = $16,000
Therefore, the answer is C) $16,220, which is closest to the calculated net operating income of $16,000.

Zelenka Clinic Uses Client-Visits as Its Measure of Activity