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:

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:

Quizplus · Accepted Answer

Using the provided formulas, the flexible budget for 2,580 tenant-days would be:

Variable Costs:
Supplies: $2,580 x $4.50 = $11,610
Wages and Salaries: $2,580 x $6.50 = $16,770
Total Variable Costs: $11,610 + $16,770 = $28,380

Fixed Costs: $12,800

Total Costs: $28,380 + $12,800 = $41,180

Revenue: $2,580 x $20.60 = $53,208

Net Operating Income: $53,208 - $41,180 = $11,028

Therefore, the closest net operating income to the actual level of activity of 2,580 tenant-days is $11,028. However, since none of the answer choices match this amount, we need to select the closest one, which is C) $11,382, with a difference of only $354 from the actual amount.

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