Question
Question 3 The owner of Ricks Hairstyling, prepared the March budget and also the March actual that appears below. Net income is higher than budget,
- Question 3 The owner of Ricks Hairstyling, prepared the March budget and also the March actual that appears below. Net income is higher than budget, however, based on the additional 100 visits (1,100 actual vs 1,000) net income is expected to be higher. Prepare a flexible budget at the 1,100 visit level and compare revenue, expenses and operating income actual to the flexible budget.
Ricks Hairstyling Planning Budget For the Month Ended March 31 | |
|
|
Budgeted client-visits (quantity - q)........................... | 1,000 |
|
|
Revenue ($180.00q).................................................. | $180,000 |
Expenses: |
|
Wages and salaries ($65,000 +$37.00q)............... | 102,000 |
Hairstyling supplies ($1.50q).................................. | 1,500 |
Client gratuities ($4.10q)......................................... | 4,100 |
Electricity ($1,500 + $0.10q)................................... | 1,600 |
Rent ($28,500)........................................................ | 28,500 |
Liability insurance ($2,800)..................................... | 2,800 |
Employee health insurance ($21,300).................... | 21,300 |
Miscellaneous ($1,200 + $0.20q)........................... | 1,400 |
Total expense............................................................ | 163,200 |
Net operating income................................................. | $ 16,800 |
Notice, Rick created formulas for his revenue and his expenses.
- The hairstyling supplies and client gratuities are variable costs.
- The wages and salaries, electricity, and miscellaneous are mixed costs.(variable portion shown $/q)
- The rent, liability insurance, and employee health insurance are fixed costs.
Ricks Hairstyling Actual Income Statement For the Month Ended March 31 | |
|
|
Actual client-visits...................................................... | 1,100 |
|
|
Revenue..................................................................... | $194,200 |
Expenses: |
|
Wages and salaries................................................ | 106,900 |
Hairstyling supplies................................................. | 1,620 |
Client gratuities....................................................... | 6,870 |
Electricity................................................................. | 1,550 |
Rent......................................................................... | 28,500 |
Liability insurance................................................... | 2,800 |
Employee health insurance.................................... | 22,600 |
Miscellaneous......................................................... | 2,130 |
Total expense............................................................ | 172,970 |
Net operating income................................................. | $ 21,230 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started