Nicolini 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 October, the kennel budgeted for 2,200 tenant-days, but its actual level of activity was 2,250 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for October: Data used in budgeting: Actual results for October: The administrative expenses in the planning budget for October would be closest to:
A)$7,636
B)$7,810
C)$7,850
D)$7,840

Question

Nicolini 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 October, the kennel budgeted for 2,200 tenant-days, but its actual level of activity was 2,250 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for October: Data used in budgeting:  Actual results for October:  The administrative expenses in the planning budget for October would be closest to:
A)$7,636 
B)$7,810 
C)$7,850 
D)$7,840

Quizplus · Accepted Answer

We need to calculate the actual administrative expenses based on the actual level of activity.

Using the formula given in the data used in budgeting:
Admin expenses = $5,500 + ($3.00 x Number of tenant days)

For the actual level of activity of 2,250 tenant-days, the administrative expenses would be:
Admin expenses = $5,500 + ($3.00 x 2,250) = $5,500 + $6,750 = $12,250

However, we need to find the administrative expenses in the planning budget, which was based on 2,200 tenant-days.

Using the same formula for 2,200 tenant-days:
Admin expenses = $5,500 + ($3.00 x 2,200) = $5,500 + $6,600 = $12,100

Therefore, the difference between the actual administrative expenses and the budgeted administrative expenses is:
$12,250 - $12,100 = $150

So the closest option to the budgeted administrative expenses in the planning budget would be:
$12,100 - $150 = $7,840

Therefore, the best choice is D, $7,840.

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