Cotty Clinic uses client-visits as its measure of activity. During March, the clinic budgeted for 3,000 client-visits, but its actual level of activity was 2,970 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for March:
-The occupancy expenses in the flexible budget for March would be closest to:
A) $13,400
B) $12,770
C) $13,349
D) $13,029

Question

Cotty Clinic uses client-visits as its measure of activity. During March, the clinic budgeted for 3,000 client-visits, but its actual level of activity was 2,970 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for March: 
-The occupancy expenses in the flexible budget for March would be closest to:
A) $13,400 
B) $12,770 
C) $13,349 
D) $13,029

Quizplus · Accepted Answer

Using the data provided, we can calculate the variable cost per client-visit as follows:

Variable cost per client-visit = (Actual total variable costs - Fixed costs) / Actual client-visits
= ($31,800 - $8,400) / 2,970
= $8.51

Now, using the flexible budget formula for occupancy expenses, we have:

Occupancy expenses = Fixed occupancy costs + (Variable occupancy costs per client-visit x Actual client-visits)
= $5,400 + ($8.51 x 2,970)
= $13,349.70 (rounded to nearest dollar)

Therefore, the closest option is C) $13,349.

Cotty Clinic Uses Client-Visits as Its Measure of Activity