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 administrative expenses in the planning budget for March would be closest to:
A) $6,288
B) $6,300
C) $6,418
D) $6,483

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 administrative expenses in the planning budget for March would be closest to:
A) $6,288 
B) $6,300 
C) $6,418 
D) $6,483

Quizplus · Accepted Answer

Based on the information provided, we can use the following formulas to calculate the budgeted and actual administrative expenses:

Budgeted administrative expenses = Budgeted total expenses - (Budgeted variable expenses per client-visit x Actual client-visits)
= $91,350 - ($15 x 3,000)
= $91,350 - $45,000
= $46,350

Actual administrative expenses = Actual total expenses - Actual variable expenses
= $88,920 - ($15 x 2,970)
= $88,920 - $44,550
= $44,370

Therefore, the administrative expenses in the planning budget for March would be closest to $6,300 (which is $46,350 divided by 7.35, the budgeted ratio of administrative expenses to total expenses).

Cotty Clinic Uses Client-Visits as Its Measure of Activity