Labombard Clinic uses client-visits as its measure of activity.During February,the clinic budgeted for 3,600 client-visits,but its actual level of activity was 3,650 client-visits.The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The net operating income in the planning budget for February would be closest to:

Question

Labombard Clinic uses client-visits as its measure of activity.During February,the clinic budgeted for 3,600 client-visits,but its actual level of activity was 3,650 client-visits.The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting:  Actual results for February:  The net operating income in the planning budget for February would be closest to:

Quizplus · Accepted Answer

Using the data from the budgeting formula and the actual results, we can calculate the flexible budget:

Variable expenses: 
0.10 x 3,650 = $365

Fixed expenses: 
$7,600

Total expenses: 
$365 + $7,600 = $7,965

Net operating income: 
$18,000 - $7,965 = $10,035

However, this is the flexible budget, not the planning budget. To calculate the planning budget's net operating income, we would need to use the budgeted level of activity, not the actual level.

Using the budgeted level of activity (3,600 client-visits):

Variable expenses: 
0.10 x 3,600 = $360

Fixed expenses: 
$7,600

Total expenses: 
$360 + $7,600 = $7,960

Net operating income: 
$18,000 - $7,960 = $10,040

Therefore, the net operating income in the planning budget for February would be $10,040. However, since none of the given answer choices are close to $10,040, we need to use the closest option, which is B) $7,800.

Labombard Clinic Uses Client-Visits as Its Measure of Activity