
Stegemann Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for May.

 Fixed Element per MonthVariable Element per Container RefurbishedActual Total for MayRevenue
 
$ 5,300

$ 156,400

Employee salaries and wages

$ 42,900

$ 1,300

$ 82,300

Refurbishing materials
 
$ 500

$ 15,100

Other expenses

$ 42,900
 
$ 41,900

When the company prepared its planning budget at the beginning of May, it assumed that 27 containers would have been refurbished. However, 29 containers were actually refurbished during May.

The revenue in the company's flexible budget for May would have been closest to:

Multiple Choice

$145,614

$153,700

$143,100

$156,400




To calculate the revenue in the flexible budget, we need to adjust the company's original budget for the actual number of containers refurbished, which was 29 instead of the assumed 27. This process accounts for variable costs, which change based on activity, while fixed costs remain constant regardless of the number of containers.

**Flexible Budget Revenue Calculation:**

1. **Revenue:**
   - The company expected to refurbish 27 containers, but actually refurbished 29.
   - The revenue has both fixed and variable components, but based on the problem, the revenue per container appears to be entirely variable.
   - From the information provided, the revenue for 29 containers in May was $156,400.

Now, we need to determine the revenue per container:
\[
\text{Revenue per container} = \frac{156,400}{29} = 5,393.10 \, \text{(approximately)}
\]

Using this rate for flexible budgeting:
\[
\text{Flexible budget revenue for 29 containers} = 5,393.10 \times 29 = 156,400
\]

Therefore, the correct answer is:
\[
\boxed{156,400}
\]

Let me know if you need further clarification or have any questions!

---

### Follow-up Questions:
1. How does a flexible budget help in performance evaluation compared to a static budget?
2. What are fixed costs, and how do they differ from variable costs?
3. Why is it important for companies to adjust budgets based on actual activity?
4. How do you calculate the break-even point in units refurbished?
5. What is the significance of operating leverage in relation to fixed and variable costs?

#### Tip:  
A flexible budget is a valuable tool for adjusting budget expectations based on real-time data, allowing businesses to evaluate performance more accurately.

Stegemann Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for May.

Fixed Element per MonthVariable Element per Container RefurbishedActual Total for MayRevenue
$ 5,300
$ 156,400
Employee salaries and wages
$ 42,900
$ 1,300
$ 82,300
Refurbishing materials
$ 500
$ 15,100
Other expenses
$ 42,900
$ 41,900
When the company prepared its planning budget at the beginning of May, it assumed that 27 containers would have been refurbished. However, 29 containers were actually refurbished during May.

The revenue in the company's flexible budget for May would have been closest to:

Multiple Choice
$145,614
$153,700
$143,100
$156,400

Learn how to calculate the flexible budget revenue for Stegemann Corporation based on the actual number of containers refurbished in May. Understand the difference between fixed and variable costs, and how flexible budgeting adjusts for activity levels. This detailed solution covers essential budgeting concepts and revenue formulas.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation