Grohs 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 December, the kennel budgeted for 2,500 tenant-days, but its actual level of activity was 2,530 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: The administrative expenses in the planning budget for December would be closest to:
A) $6,893
B) $6,700
C) $6,976
D) $6,706

Question

Grohs 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 December, the kennel budgeted for 2,500 tenant-days, but its actual level of activity was 2,530 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting:  The administrative expenses in the planning budget for December would be closest to:
A) $6,893 
B) $6,700 
C) $6,976 
D) $6,706

Quizplus · Accepted Answer

Cost = Fixed cost + (Variable cost per unit × q)
= $6,200 + ($0.20 × 2,500) = $6,700

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