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Sathre 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.
Fixed Element
Variable Element per
per Month
Well Serviced
Revenue
$ 4,500
Employee salaries and wages
$ 56,400
$ 900
Servicing materials
$ 700
Other expenses
$ 35,400
When the company prepared its planning budget at the beginning of December, it assumed that 34 wells
would have been serviced. However, 32 wells were actually serviced during December.
The "Employee salaries and wages" in the flexible budget for December would have been closest to:
$87,000
$84,600
$85,200
$89,888



Answer :

icetornato
To find the "Employee salaries and wages" in the flexible budget for December, we calculate the variable portion of this cost based on the actual number of wells serviced.

Given:
- Fixed Element per Month: $56,400
- Variable Element per Well Serviced: $900

Since the company serviced 32 wells during December:
Variable Element = $900 × 32
Variable Element = $28,800

Total Employee salaries and wages = Fixed Element per Month + Variable Element
Total Employee salaries and wages = $56,400 + $28,800
Total Employee salaries and wages = $85,200

So, the "Employee salaries and wages" in the flexible budget for December would be closest to $85,200. Therefore, the answer is:
- $85,200

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