Ruozzo Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for July. When the company prepared its planning budget at the beginning of July, it assumed that 27 customers would have been served. However, 22 customers were actually served during July.The "Employee salaries and wages" in the flexible budget for July would have been closest to:

A) $67,400
B) $63,300
C) $77,686
D) $62,900

Question

Ruozzo Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for July.

When the company prepared its planning budget at the beginning of July, it assumed that 27 customers would have been served. However, 22 customers were actually served during July.The "Employee salaries and wages" in the flexible budget for July would have been closest to:

A) $67,400
B) $63,300
C) $77,686
D) $62,900

Alain Flores · Accepted Answer

Final Answer : D, Explanation :  To find the answer, we need to calculate the flexible budget for employee salaries and wages based on the actual number of customers served in July.   Variable cost per customer = ($22,530 - $11,565) / 54 = $203.61   Flexible budget for employee salaries and wages = Fixed Cost + (Variable Cost per Customer x Actual Customers Served)   = $28,000 + ($203.61 x 22)   = $28,000 + $4,479.42   = $32,479.42   Therefore, the closest answer is choice D: $62,900.

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