Sterr Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $49,340 per month plus $2,635 per flight plus $2 per passenger. The company expected its activity in January to be 73 flights and 191 passengers, but the actual activity was 75 flights and 193 passengers. The actual cost for plane operating costs in January was $246,440.
-The plane operating costs in the planning budget for January would be closest to:
A)$247,351
B)$246,440
C)$239,868
D)$242,077

Question

Quizplus · Accepted Answer

Cost = Fixed cost + Variable cost per unit1 F1F1F1S1F1F1F10 q1 + Variable cost per unit2 F1F1F1S1F1F1F10 q2
= $49,340 + $2,635 F1F1F1S1F1F1F10 73 + $2 F1F1F1S1F1F1F10 191 = $242,077

Sterr Air Uses Two Measures of Activity, Flights and Passengers