Prepare a flexible budget for May.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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) | 300 | |
| Revenue ($460.00q) | $ | 138,000 |
| Expenses: | ||
| Wages and salaries ($11,600 + $120.00q) | 47,600 | |
| Supplies ($4.00q) | 1,200 | |
| Equipment rental ($2,200 + $21.00q) | 8,500 | |
| Insurance ($4,000) | 4,000 | |
| Miscellaneous ($510 + $1.48q) | 954 | |
| Total expense | 62,254 | |
| Net operating income | $ | 75,746 |
During May, the company’s actual activity was 290 diving-hours.
Required:
Prepare a flexible budget for May. (
| Puget Sound Divers | |
| Flexible Budget | |
| For the Month Ended May 31 | |
| Revenue | |
| Expenses: | |
| Wages and salaries | |
| Supplies | |
| Equipment rental | |
| Insurance | |
| Miscellaneous | |
| Total expense | |
| Net operating income |
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