Please solve the following questions determining your own way 3) Magliacane Corp
ID: 2564608 • Letter: P
Question
Please solve the following questions determining your own way 3) Magliacane Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Fixed Element per Month Variable Element per Customer Served Revenue Employee salaries and wages Travel expenses Other expenses s 2,800 S 600 s 200 s 43,100 S 21,400 When the company prepared its planning budget at the beginning of February, it assumed that 39 customers would have been served. However, 35 customers were actually served during February. What would be the revenue in the company's flexible budget for February? a. b. What would be to "total employee salaries and wages"? c. What would be the "total travel expenses"? d. What would be the "net profit" of the February?Explanation / Answer
Note : Under flexible budget the varable element is calculated by multiplying actual level of activity & variable cost per unit as per the standard budget. Whereas fixed cost remains the same in both flexible and standard budget.
Answer a
Revenue in company's flexible budget for February
= No . of customer actually served * Budgeted per customer served = 35 * $2,800 = $98,000
Answer b
Total Employees salary & wages =
Fixed Cost as per the budget + ( Variable element per customer served *No . of customer actually served)
= $43,100 + ($600 * 35) = $64,100
Answer c
Total travel expenses =Travel expense per customer served *No . of customer actually served
= $200 * 35 = $7,000
Answer d
Net profit for Feb = Total Revenue - Total Employees salary & wages - Total travel expenses - Other expenses
$98,000 - $64,100 - $7,000 - $21,400 = $5,500