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

Question

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

Quizplus · Accepted Answer

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.

Paulis Kennel Uses Tenant-Days as Its Measure of Activity; an Animal