Courington Detailing's cost formula for its materials and supplies is $2,420 per month plus $9 per vehicle. For the month of August, the company planned for activity of 63 vehicles, but the actual level of activity was 33 vehicles. The actual materials and supplies for the month was $2,840.The materials and supplies in the flexible budget for August would be closest to:
A) $1,565
B) $2,717
C) $2,987
D) $2,840

Question

Quizplus · Accepted Answer

Using the cost formula: 
Fixed cost = $2,420 
Variable cost (per vehicle) = $9

Flexible budget for 63 vehicles: 
Total cost = $2,420 + ($9 x 63) = $2,987

To find the flexible budget for 33 vehicles, we will use the cost formula: 
Total cost = $2,420 + ($9 x 33) = $2,797

However, the actual materials and supplies cost for August was $2,840. This means that the company incurred $43 ($2,840 - $2,797) more in materials and supplies cost than what they should have incurred based on the flexible budget.

Therefore, the materials and supplies in the flexible budget for August would be closest to $2,797 + $43 = $2,740, which is closest to choice B ($2,717).

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