Problem - Pearse Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 5,400 tenant-days, but its actual level of activity was 5,420 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element per month Variable element per tenant-day
Revenue $31.90
Wages and salarie $4,400 $7.90
Food and supplies 500 12.70
Facility expenses 8,800 4.90
Administrative expenses 7,800 0.20
Total expenses $21,500 $25.70
Actual results for December:
Revenue $109,180
Wages and salaries $23,640
Food and supplies $36,804
Facility expenses $19,390
Administrative expenses $9,168
The net operating income in the planning budget for December would be closest to:
a. $12,104
b. $20,084
c. $20,178
d .$11,980