Supreme Catering At the end of January, Supreme Catering prepared the following budget for the upcoming month of February estimating that they would serve 5,000 people:
During February, there were 4,800 guests actually served. Actual costs incurred were $67,200 for variable costs and $8,000 for fixed costs. Each guest was charged $25.
Refer to the Supreme Catering information above. Supreme Catering's flexible budget for February would show net operating income of:
A) $63,000.
B) $60,200.
C) $59,200.
D) $45,800.

Question

Supreme Catering At the end of January, Supreme Catering prepared the following budget for the upcoming month of February estimating that they would serve 5,000 people:
 During February, there were 4,800 guests actually served. Actual costs incurred were $67,200 for variable costs and $8,000 for fixed costs. Each guest was charged $25.
Refer to the Supreme Catering information above. Supreme Catering's flexible budget for February would show net operating income of:
A) $63,000. 
B) $60,200. 
C) $59,200. 
D) $45,800.

Quizplus · Accepted Answer

To calculate the flexible budget, we need to use the actual number of guests served (4,800) and the budgeted cost per guest ($20 variable and $4 fixed).

Variable Costs: 
4,800 guests x $20 per guest= $96,000

Fixed Costs: 
$8,000

Total Costs:
$96,000 + $8,000 = $104,000

Total Revenue: 
4,800 guests x $25 per guest = $120,000

Net Operating Income: 
$120,000 - $104,000 = $16,000

Therefore, the flexible budget would show a net operating income of $16,000 or $60,200 more than the actual net operating income of $63,000 given in the original budget.

Supreme Catering at the End of January, Supreme Catering Prepared