Asked by Hadeel Damra on Jul 26, 2024
Verified
Witten 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. A total of 27 customers were actually served during January.The total expenses in the flexible budget for January would have been closest to:
A) $113,748
B) $133,400
C) $141,400
D) $139,600
Total Expenses
The sum of all costs incurred by a business or individual within a specified period.
Customers Served
A metric or measure indicating the number of clients or customers who have been provided with services or goods by a business within a specific time frame.
Flexible Budget
A budget that adjusts or flexes with changes in volume or activity levels, providing more accurate budgeting comparatives.
- Apply modifiable budgetary calculations to gauge foreseen charges based on set activity scales.
- Investigate the differences in expenditures compared to budget projections.
- Conduct an appraisal on a company's functionality with adaptable budget reports.
Verified Answer
Variable cost per customer = Change in cost / Change in activity
= ($157,500 - $100,500) / (36,000 - 18,000)
= $57,000 / 18,000
= $3.17 per customer
Using the total cost equation:
Total cost = Fixed cost + (Variable cost per customer × Number of customers served)
= $47,250 + ($3.17 × 27)
= $141,400
Therefore, the total expenses in the flexible budget for January would have been closest to option C ($141,400).
Learning Objectives
- Apply modifiable budgetary calculations to gauge foreseen charges based on set activity scales.
- Investigate the differences in expenditures compared to budget projections.
- Conduct an appraisal on a company's functionality with adaptable budget reports.
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