Gandrud Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During June, the kennel budgeted for 2,600 tenant-days, but its actual level of activity was 2,580 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: The net operating income in the flexible budget for June would be closest to:
A)$11,640
B)$14,332
C)$11,382
D)$14,113

Question

Gandrud Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During June, the kennel budgeted for 2,600 tenant-days, but its actual level of activity was 2,580 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting:  The net operating income in the flexible budget for June would be closest to:
A)$11,640 
B)$14,332 
C)$11,382 
D)$14,113

Quizplus · Accepted Answer

Flexible Budget = Budgeted Net Operating Income + (Budgeted Variable Cost per Tenant-Day x Actual Level of Activity) - Actual Fixed Costs
Budgeted Variable Cost per Tenant-Day = (Budgeted Variable Costs / Budgeted Tenant-Days) = ($31,200 / 2,600) = $12 per tenant-day
Flexible Budget = $9,760 + ($12 x 2,580) - $6,358 = $11,382

Gandrud Kennel Uses Tenant-Days as Its Measure of Activity; an Animal