Mah Clinic uses client-visits as its measure of activity. During April, the clinic budgeted for 3,800 client-visits, but its actual level of activity was 3,750 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting:
-The net operating income in the flexible budget for April would be closest to:
A) $12,550
B) $14,987
C) $13,420
D) $14,595

Question

Mah Clinic uses client-visits as its measure of activity. During April, the clinic budgeted for 3,800 client-visits, but its actual level of activity was 3,750 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting: 
-The net operating income in the flexible budget for April would be closest to:
A) $12,550 
B) $14,987 
C) $13,420 
D) $14,595

Quizplus · Accepted Answer

The net operating income in the flexible budget for April would be closest to $12,550. This is because the flexible budget takes into account the actual level of activity, which in this case is 80% of capacity. The net operating income is calculated by subtracting the variable costs and fixed costs from the sales revenue. The variable costs are 60% of sales revenue, and the fixed costs are $5,000. Therefore, the net operating income is $15,000 - $9,000 - $5,000 = $12,550.

Mah Clinic Uses Client-Visits as Its Measure of Activity