Prowse Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. A total of 42 wells were actually serviced during October.The "Other expenses" in the flexible budget for October would have been closest to:

A) $34,093
B) $38,200
C) $43,930
D) $38,700

Question

Prowse Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes.

A total of 42 wells were actually serviced during October.The "Other expenses" in the flexible budget for October would have been closest to:

A) $34,093
B) $38,200
C) $43,930
D) $38,700

Kylan Jackson · Accepted Answer

Final Answer : B, Explanation :  Total flexible budget for servicing 42 wells:Fixed Costs: $52,600Variable Costs: ($1,870 × 42) = $78,540Flexible budget: $52,600 + $78,540 = $131,140Flexible budget for other expenses: 35% of $131,140 = $45,899However, the actual other expenses incurred were $7,699, which means that the actual other expenses were $38,200 less than the flexible budget for other expenses. Therefore, the closest estimate for the Other expenses in the flexible budget for October would be B) $38,200.

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