Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below: Puget Sound Divers Planning Budget For the Month Ended May 31 Budgeted diving-hours (q) 350 Revenue ($390.00q) $ 136,500 Expenses: Wages and salaries ($11,100 + $120.00q) 53,100 Supplies ($5.00q) 1,750 Equipment rental ($2,500 + $25.00q) 11,250 Insurance ($4,100) 4,100 Miscellaneous ($520 + $1.42q) 1,017 Total expense 71,217 Net operating income $ 65,283 During May, the company’s actual activity was 340 diving-hours. Required: Prepare a flexible budget for May. (Round your answers to the nearest whole number.)

Puget Sound Divers

Puget Sound Divers Planning and Flexible Budgets

For the Month Ended May 31

                                          Planning      Flexible

                                           Budget       Budget

Budgeted diving-hours (q)    350              340

Revenue ($390.00q)     $ 136,500   $132,600

Expenses:

Wages and salaries            53,100        51,900

Supplies ($5.00q)                 1,750           1,700

Equipment rental                11,250         11,000

Insurance ($4,100)               4,100           4,100

Miscellaneous                      1,017           1,003

Total expense                    71,217        69,703

Net operating income $ 65,283     $ 62,897

Explanation:

a) Data and Calculations:

Puget Sound Divers Planning Budget

For the Month Ended May 31

Budgeted diving-hours (q) 350

Revenue ($390.00q)                            $ 136,500

Expenses:

Wages and salaries ($11,100 + $120.00q) 53,100

Supplies ($5.00q)                                         1,750

Equipment rental ($2,500 + $25.00q)      11,250

Insurance ($4,100)                                       4,100

Miscellaneous ($520 + $1.42q)                   1,017

Total expense                                            71,217

Net operating income                         $ 65,283

Flexing the budget with actual activity of 340:

Revenue ($390.00q) $ 136,500/350 * 340 = $132,600

Expenses:

Wages and salaries ($11,100 + $120.00 * 340) = $51,900

Supplies ($5.00q)                                         1,750/350 * 340 = $1,700

Equipment rental ($2,500 + $25.00 * 340 = $11,000

Miscellaneous ($520 + $1.42 * 340 = $1,003