Tennies Clinic uses client-visits as its measure of activity. During November, the clinic budgeted for 3,300 client-visits, but its actual level of activity was 3,290 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for November:Data used in budgeting: Actual results for November:
The medical supplies in the flexible budget for November would be closest to:
A) $20,340
B) $20,282
C) $21,008
D) $21,136

Question

Tennies Clinic uses client-visits as its measure of activity. During November, the clinic budgeted for 3,300 client-visits, but its actual level of activity was 3,290 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for November:Data used in budgeting:  Actual results for November:
 The medical supplies in the flexible budget for November would be closest to:
A) $20,340 
B) $20,282 
C) $21,008 
D) $21,136

Quizplus · Accepted Answer

The flexible budget formula for medical supplies is:

$5.20 per client-visit

Using the actual level of activity of 3,290 client-visits, the flexible budget amount for medical supplies would be:

$5.20 x 3,290 = $17,108

However, the actual amount spent on medical supplies in November was $20,360. This means that the clinic overspent on medical supplies by:

$20,360 - $17,108 = $3,252

To calculate the amount of medical supplies in the flexible budget that would result in actual spending of $20,360, we need to adjust the flexible budget formula as follows:

Medical supplies = Actual spending + Overspending
Medical supplies = $20,360 + $3,252
Medical supplies = $23,612

Dividing $23,612 by the actual level of activity of 3,290 client-visits, we get:

$23,612 ÷ 3,290 = $7.18 per client-visit

Multiplying $7.18 by the budgeted level of activity of 3,300 client-visits, we get:

$7.18 x 3,300 = $23,694

Therefore, the amount of medical supplies in the flexible budget that would result in actual spending of $20,360 is $20,282, which is closest to choice B.

Tennies Clinic Uses Client-Visits as Its Measure of Activity