Reference no: EM132603123

A company operates sight-seeing buses. Management has identified two cost drivers-the number of buses in operation and the number of passengers served -that it uses in its budgeting and performance reports. Data concerning the company's cost formulas appear below:

                                               Fixed Cost per Month           Cost per Bus                      Cost per Passenger

Vehicle operating costs            $6,800                               $476                                  $3

Advertising                              $2,500

Administrative costs               $5,300                                  $38                                $1.5

Insurance                                $3,900

Question 1: For example, vehicle operating costs should be $6,800 per month plus $476 per bus plus $3 per passenger. The company's sales revenue should average $32 per passenger. In July, the company operated 55 buses and served a total of 3,200 passengers. How much is the company's flexible budget operating income for July?

Multiple Choice

Option 1: $32,980

Option 2: $41,230

Option 3: $59,820

Option 4: $61,170