Chimilio Clinic uses client-visits as its measure of activity. During June, the clinic budgeted for 3,400 client-visits, but its actual level of activity was 3,360 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for June:Data used in budgeting: Actual results for January:
The occupancy expenses in the flexible budget for June would be closest to:

A) $13,802
B) $14,100
C) $14,040
D) $13,480

Question

Chimilio Clinic uses client-visits as its measure of activity. During June, the clinic budgeted for 3,400 client-visits, but its actual level of activity was 3,360 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for June:Data used in budgeting:

Actual results for January:

The occupancy expenses in the flexible budget for June would be closest to:

A) $13,802
B) $14,100
C) $14,040
D) $13,480

Austin Lozano · Accepted Answer

Final Answer : C, Explanation :  Flexible budget occupancy expenses = budgeted fixed occupancy expenses + (budgeted variable occupancy expenses per unit * actual activity)Budgeted fixed occupancy expenses = $4,500Budgeted variable occupancy expenses per unit = ($17,000 - $8,500) / 4,000 = $4.50 per unitActual activity = 3,360 client-visitsFlexible budget occupancy expenses = $4,500 + ($4.50 * 3,360) = $14,040Therefore, the closest option is C ($14,040).

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