Asked by Veronica Vaselin on May 06, 2024
Verified
Hubbard 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 January, the kennel budgeted for 2,100 tenant-days, but its actual level of activity was 2,060 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for January:Data used in budgeting: Actual results for January:
The wages and salaries in the planning budget for January would be closest to:
A) $17,282
B) $17,618
C) $17,420
D) $17,132
Tenant-Days
A metric in property management, indicating the total number of days that units were occupied by tenants within a specific period.
Wages and Salaries
Payments to employees for their work or services, typically on an hourly (wages) or annual (salaries) basis.
Planning Budget
A forward-looking budget that outlines the financial plans, objectives, and resources over a specific timeframe, often used for guiding the operations and evaluating performance.
- Apply dynamic financial estimating methods to gauge forecasted costs in accordance with established activity benchmarks.
- Analyze the outcome of changes in operational intensity on budget formulations.
- Understand the role of fixed and variable costs in budgeting and variance analysis.
Verified Answer
Variable cost per tenant-day = Budgeted variable costs ÷ Budgeted tenant-days = $12,210 ÷ 2,100 = $5.81 per tenant-day
Using this variable cost per tenant-day, we can calculate the flexible budget for actual activity level:
Flexible budget = Variable cost per tenant-day x Actual tenant-days = $5.81 x 2,060 = $11,967.60
Now, we can calculate the total wages and salaries for January:
Total wages and salaries = Fixed costs + Variable cost per tenant-day x Actual tenant-days
= $5,480 + $5.81 x 2,060
= $17,419.60
Therefore, the closest option is C) $17,420.
Learning Objectives
- Apply dynamic financial estimating methods to gauge forecasted costs in accordance with established activity benchmarks.
- Analyze the outcome of changes in operational intensity on budget formulations.
- Understand the role of fixed and variable costs in budgeting and variance analysis.
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