Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below: The total overhead cost at an activity level of 9,700 guest-days per month should be:

Question

Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below:  The total overhead cost at an activity level of 9,700 guest-days per month should be:

Quizplus · Accepted Answer

To find the total overhead cost at an activity level of 9,700 guest-days per month, we need to use the formula for a flexible budget, which is:

Total overhead cost = Budgeted overhead cost at the static level + (Variable overhead rate × Actual activity level)

Using the information given in the problem, we can calculate the variable overhead rate as follows:

Variable overhead rate = (Budgeted overhead cost at the static level - Budgeted fixed overhead cost) ÷ Budgeted activity level

Variable overhead rate = ($321,750 - $165,000) ÷ 11,500 guest-days = $13.50 per guest-day

Using this variable overhead rate and the actual activity level of 9,700 guest-days, we can calculate the total overhead cost as follows:

Total overhead cost = $321,750 + ($13.50 × 9,700) = $223,950

Therefore, the best choice is C.

Ostler Hotel Bases Its Budgets on Guest-Days