Asked by Canon Graef on Jul 20, 2024
Verified
Paulis 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 February, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 2,980 tenant-days. The kennel 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 flexible budget for February would be closest to:
A) $18,080
B) $17,986
C) $16,482
D) $16,700
Tenant-Days
A metric used in real estate and hospitality to quantify the total number of days that units are occupied by tenants within a given period.
Flexible Budget
A budget that adjusts or flexes with changes in activity or volume levels.
- Calculate and interpret net operating income based on flexible and planning budgets.
Verified Answer
MR
Mohammad Rony HossainJul 25, 2024
Final Answer :
C
Explanation :
First, we need to calculate the flexible budget for February using the formula provided:
Flexible Budget = Budgeted Amount + (Actual Activity - Budgeted Activity) x Budgeted Rate
Flexible Budget = $60,500 + (2,980 - 3,000) x $12.50
Flexible Budget = $60,500 - $250
Flexible Budget = $60,250
Next, we need to calculate the net operating income in the flexible budget by subtracting the actual costs from the flexible budget:
Net Operating Income = Flexible Budget - Actual Costs
Net Operating Income = $60,250 - $43,768
Net Operating Income = $16,482
Therefore, the net operating income in the flexible budget for February would be closest to $16,482, which is option C.
Flexible Budget = Budgeted Amount + (Actual Activity - Budgeted Activity) x Budgeted Rate
Flexible Budget = $60,500 + (2,980 - 3,000) x $12.50
Flexible Budget = $60,500 - $250
Flexible Budget = $60,250
Next, we need to calculate the net operating income in the flexible budget by subtracting the actual costs from the flexible budget:
Net Operating Income = Flexible Budget - Actual Costs
Net Operating Income = $60,250 - $43,768
Net Operating Income = $16,482
Therefore, the net operating income in the flexible budget for February would be closest to $16,482, which is option C.
Learning Objectives
- Calculate and interpret net operating income based on flexible and planning budgets.
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