Exercise 9-3 Prepare a Flexible Budget with More Than One Cost Driver [LO9-3]

Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost driversthe number of cruises and the number of passengersthat it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 86 passengers can be accommodated on the tour boat. Data concerning the companys cost formulas appear below:

	Fixed Cost per Month			Cost per Cruise			Cost per Passenger
Vessel operating costs	$	6,200		$	478.00		$	3.50
Advertising	$	2,900
Administrative costs	$	5,300		$	33.00		$	1.50
Insurance	$	3,700

For example, vessel operating costs should be $6,200 per month plus $478.00 per cruise plus $3.50 per passenger. The companys sales should average $32.00 per passenger. In July, the company provided 51 cruises for a total of 3,050 passengers.

Required:

Prepare the companys flexible budget for July.

Alyeski Tours
Flexible Budget
For the Month Ended July 31
Revenue
Expenses:
Vessel operating costs
Advertising
Administrative costs
Insurance
Total expense
Net operating income