Laboe 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 February, the kennel budgeted for 2,900 tenant-days, but its actual level of activity was 2,940 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting:
-The administrative expenses in the planning budget for February would be closest to:
A) $7,814
B) $7,770
C) $7,922
D) $7,782

Question

Laboe 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 February, the kennel budgeted for 2,900 tenant-days, but its actual level of activity was 2,940 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: 
-The administrative expenses in the planning budget for February would be closest to:
A) $7,814 
B) $7,770 
C) $7,922 
D) $7,782

Quizplus · Accepted Answer

To calculate the administrative expenses, we need to use the following formula from the given data:
Administrative expenses = $5,400 + ($0.80 x tenant-days)
Using this formula with the actual level of activity (2,940 tenant-days), we get:
Administrative expenses = $5,400 + ($0.80 x 2,940) = $8,322
However, we are asked for the administrative expenses in the planning budget, which is based on the budgeted number of tenant-days (2,900). Using the same formula with 2,900 tenant-days, we get:
Administrative expenses = $5,400 + ($0.80 x 2,900) = $7,770
Therefore, the closest option is B) $7,770.

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