Virgen 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 May, the kennel budgeted for 3,700 tenant-days, but its actual level of activity was 3,690 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May:Data used in budgeting Actual results for May:
The administrative expenses in the planning budget for May would be closest to:
A) $8,409
B) $8,386
C) $8,280
D) $8,276

Question

Virgen 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 May, the kennel budgeted for 3,700 tenant-days, but its actual level of activity was 3,690 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May:Data used in budgeting  Actual results for May:
 The administrative expenses in the planning budget for May would be closest to:
A) $8,409 
B) $8,386 
C) $8,280 
D) $8,276

Quizplus · Accepted Answer

We can use the following formula to calculate the budgeted administrative expenses:
Budgeted administrative expenses = Budgeted variable cost per unit of activity x Actual level of activity + Budgeted fixed expenses
From the data provided:
Budgeted variable cost per unit of activity = $1.50
Actual level of activity = 3,690 tenant-days
Budgeted fixed expenses = $4,800
Plugging in the numbers:
Budgeted administrative expenses = $1.50 x 3,690 + $4,800 = $10,035
Therefore, the closest answer choice is C) $8,280.

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