Canniff 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 $56,810 per month plus $2,628 per flight plus $10 per passenger. The company expected its activity in February to be 64 flights and 264 passengers, but the actual activity was 63 flights and 265 passengers. The actual cost for plane operating costs in February was $223,800. The plane operating costs in the planning budget for February would be closest to:
A) $227,642
B) $226,428
C) $225,024
D) $223,800

Question

Quizplus · Accepted Answer

The plane operating costs in the planning budget for February would be closest to $227,642.The cost formula for plane operating costs is $56,810 per month plus $2,628 per flight plus $10 per passenger. The company expected its activity in February to be 64 flights and 264 passengers, so the planned cost for plane operating costs would be:$56,810 + (64 * $2,628) + (264 * $10) = $227,642

Canniff Air Uses Two Measures of Activity, Flights and Passengers