Courington Detailing's cost formula for its materials and supplies is $1,970 per month plus $8 per vehicle. For the month of August, the company planned for activity of 92 vehicles, but the actual level of activity was 57 vehicles. The actual materials and supplies for the month was $2,650.The materials and supplies in the planning budget for August would be closest to:
A) $2,706
B) $2,426
C) $4,297
D) $2,650

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost that the company planned for in August:
Total cost = $1,970 + ($8 x 92) = $1,970 + $736 = $2,706

Next, we can use this total cost to calculate the planned materials and supplies cost per vehicle:
Planned materials and supplies cost per vehicle = Total cost / Number of vehicles
Planned materials and supplies cost per vehicle = $2,706 / 92 = $29.50

Finally, we can use the planned materials and supplies cost per vehicle to calculate the planned total materials and supplies cost for August:
Planned total materials and supplies cost = Planned materials and supplies cost per vehicle x Actual number of vehicles
Planned total materials and supplies cost = $29.50 x 57 = $1,678.50

Since the actual materials and supplies cost for the month was $2,650, we can see that the company spent more than it planned.

Courington Detailing's Cost Formula for Its Materials and Supplies Is