Pickrel Corporation is an oil well service company that measures its output by t

Question

Pickrel Corporation is an oil well service company that measures its output by the number of weils serviced. The compary has provided the following foxed and variable cost estimates that it uses for budgeting purposes Loed 1.100 603 ervieing nateriala other expes 34,400 when the company prepared its planning budget at the beginning of No enter, it assumed that 27 wells would have been serviced. However, 31 wells were actualy se viced during No ente The amount shown for revenue in the planning budget for November would have been closest to $170,500 $148,500 $149,98 $172,200

Explanation / Answer

While preparing the planning budget at the begining of november, it has being assumed that 27 wells would have been serviced.

Planning budget :-

As per the above planning budget :-

The amount of revenue in the planning budget for november would have been closest to = $148500

Particular Fixed element per month Variable element per well serviced No. of well Total Variable element of cost Total Revenue 0 5500 27 148500 148500 Cost : Employee salary and wages 53700 1300 27 35100 88800 Service material 0 600 27 16200 16200 Other expences 34400 34400 Total cost 139400 Net operating income (revenue less total cost) 9100

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