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lorasvet [3.4K]
3 years ago
5

Prowse Corporation is an oil well service company that measures its output by the number of wells serviced. The company has prov

ided the following fixed and variable cost estimates that it uses for budgeting purposes.
Fixed Element Variable Element
per Month per Well Serviced
Revenue $ 4,000
Employee
salaries and wages $ 43,800 $ 1,000
Servicing materials $ 600
Other expenses $ 38,200
A total of 42 wells were actually serviced during October. The “Other expenses” in the flexible budget for October would have been closest to:
Business
2 answers:
statuscvo [17]3 years ago
6 0

Answer:

In the flexible budget for October Other Expenses would be closest to $38,200.

Further Explanation:

  • Flexible budget is defined as the budget which is flexible with number of units produced in the accounting period concerned, after putting the values of variable and fixed expenses in a combined format, we put the actual expensed values to calculate the variances.
  • In the given instance, the flexible budget is prepared for the month of October only, and not for the complete accounting year.
  • Even in the flexible budget, the value of fixed expenses do not alter as fixed expenses remain static, and do not change with the level of output.
  • Since the flexible budget has its own format, as follows: there is no title of other expenses, these will be clubbed with general and administration expense. In that we will also club the employee salary and wages fixed, as later will not form part of cost of goods sold, and only the variable part of the later amounting $1,000 per well serviced is part of cost of goods sold.

The calculation for the Gross Profit and Operating Income is shown in the attached table.

As stated in table , direct cost form part of cost of goods sold. Other expenses are selling and administration expense.

Employee salaries and wages are fixed for executives and not for labor, also labor is directly related to the product (here well servicing) therefore that cost is part of cost of goods sold and fixed portion is part of administration expense.

Further the office expense is also part of administration expense and not of direct cost related to the product.  

Learn more

  • Advantages of Flexible Budget https://brainly.in/question/8466307
  • Flexible Budget for different level of Quantity https://brainly.in/question/9085036  

Key words

• Flexible Budget

• Budget

• Format of Budget

uysha [10]3 years ago
4 0

Answer:

Other expenses $ 38,200

Explanation:

The other expenses cost is a fixed cost. So it will not change based on the level wells serviced. It will not increase or decrease.

<u>So it will be displayed for the full amount. </u>

<u></u>

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A company has the following asset account balances: Buildings and equipment $9,200,000 Accumulated depreciation 1,200,000 Patent
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Company's comparative balance sheet E(Click the icon to view the comparative balance sheet.) t January 31, 2019, and 2018, repor
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Answer:

Bosley Company

Calculation of Net Income or Net Loss during the year ended January 31, 2019, under three independent situations:

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= $51 + 5 - 31 = $25 million

Situation 2. Bosley issued no stock but declared dividends of $8 million.

Net loss = stockholders' equity, January 31, 2018 less (dividends + stockholders' equity, January 31, 2019)

= $51 - (8 + 31) = $12 million

Situation 3. Bosley issued $10 million of stock and declared dividends of $50 million :

Net income = (stockholders' equity, January 31, 2019 plus dividends) minus (stockholders' equity, January 31, 2018 plus Issuance of stock)

= ($31 + 50) - ($51 + 10) = $20 million

Explanation:

a) Data and Calculations:

                                         2018    2019

Total assets                         74       48  

Total liabilities                     23       17  

Total stockholders' equity  51       31

Stockholders' equity according to the accounting equation = Assets minus Liabilities for each year.

b) Situation 1. Bosley issued $5 million of stock and declared no dividends.  

                                                                       ($' million)

Total stockholders' equity, January 31, 2018   51

Add: Issuance of stock                                       5

Net income                                                           0

Less: Dividends declared                                   0

Net loss                                                            (25 )

Total stockholders' equity, January 31, 2019   31

Net Loss = stockholders' equity, January 31, 2018 plus new issue of stock less stockholders' equity, January 31, 2019

= $51 + 5 - 31 = $25 million

c) Situation 2. Bosley issued no stock but declared dividends of $8 million.  

                                                                       ($' million)

Total stockholders' equity, January 31, 2018   51

Add: Issuance of stock                                       0

Net income                                                          0

Less: Dividends declared                                 (8 )

Net loss                                                             (12 )

Total stockholders' equity, January 31, 2019  31

Net loss = stockholders' equity, January 31, 2018 less (dividends + stockholders' equity, January 31, 2019)

= $51 - (8 + 31) = $12 million

d) Situation 3. Bosley issued $10 million of stock and declared dividends of $50 million

                                                                    ($' million)

Total stockholders' equity, January 31, 2018  51

Add: Issuance of stock                                     10

Net income                                                       20

Less: Dividends declared                               (50 )

Net loss                                                              0

Total stockholders' equity, January 31, 2019 31

Net income = (stockholders' equity, January 31, 2019 plus dividends) minus (stockholders' equity, January 31, 2018 plus Issuance of stock)

= ($31 + 50) - ($51 + 10) = $20 million

4 0
3 years ago
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